Answer the following questions using the information below:
Ghan Manufacturing produces a single product that sells for $80.Variable costs per unit equal $32.The company expects total fixed costs to be $72 000 for the next month at the projected sales level of 2000 units.In an attempt to improve performance,management is considering a number of alternative actions.Each situation is to be evaluated separately.
-Suppose management believes that a $32 000 increase in the monthly advertising expense will result in a considerable increase in sales.Sales must increase by how much to justify this additional expenditure?

Question

Quizplus · Accepted Answer

The contribution margin per unit is $80 - $32 = $48.  
To cover the additional advertising expense of $32,000, the company needs to sell an additional $32,000 / $48 per unit = 667 units (rounded up to the nearest unit). Therefore, the company must sell 667 more units to justify the additional expenditure.

Answer the Following Questions Using the Information Below