Tony Manufacturing produces a single product that sells for $80.Variable costs per unit equal $30.The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500 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 $75,000 increase in the monthly advertising expense will result in a considerable increase in sales.Sales must increase by ________ to justify this additional expenditure?
A) 1,698 units
B) 1,500 units
C) 1,550 units
D) 1,339 units

Question

Quizplus · Accepted Answer

To justify the additional $75,000 advertising expense, the increase in sales must cover this cost. The contribution margin per unit is $80 - $30 = $50. Therefore, the required increase in sales is $75,000 / $50 = 1,500 units.

Tony Manufacturing Produces a Single Product That Sells for $80