The company would like to initiate an intensive advertising campaign in one of t
ID: 2521475 • Letter: T
Question
The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,200. Marketing studies indicate that such a campaign would increase sales in the Medical market by $45,500 or increase sales in the Dental market by $39,000.
Required:
1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market?
2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market?
3. In which of the markets would you recommend that the company focus its advertising campaign?
Minneapolis Medical Dental Sales 390000 260000 130000 Variable Expenses 234000 169000 65000 Contribution Margin 156000 91000 65000 Traceable Fixed Expenses 46800 13000 33800 Markert Segment Margin 109200 78000 31200 Common Fixed expenses not traceable to markets 11700 Office segment margin 97500Explanation / Answer
1 CM ratio Medical market=91000/260000= 35% Change in Profits=(45500*35%)-5200= $10725 2 CM ratio Dental market=65000/130000= 50% Change in Profits=(39000*50%)-5200= $14300 3 In dental market, as it provides maximum profit margin