Ben & Harry Co.sold 100,000 units last year with the following results:

a.Management thinks that a 5 percent reduction in the unit sales price and a $31,000 increase in fixed advertising costs will create a 30 percent increase in unit sales.Assess this proposal and make a recommendation on what action should be taken.
b.Assume that the marketing manager thinks that the unit sales price and advertisement costs should not be changed.Instead,he recommends a $0.40 per unit increase in sales commissions to generate the 30 percent increase in unit sales and a 20 percent increase in operating income.This results in reduction of fixed costs to a certain extent.
Assess this proposal.

Question

Ben & Harry Co.sold 100,000 units last year with the following results:

a.Management thinks that a 5 percent reduction in the unit sales price and a $31,000 increase in fixed advertising costs will create a 30 percent increase in unit sales.Assess this proposal and make a recommendation on what action should be taken.
b.Assume that the marketing manager thinks that the unit sales price and advertisement costs should not be changed.Instead,he recommends a $0.40 per unit increase in sales commissions to generate the 30 percent increase in unit sales and a 20 percent increase in operating income.This results in reduction of fixed costs to a certain extent.
Assess this proposal.

Quizplus · Accepted Answer

The Answer of Ben & Harry Co.sold 100,000 units last year with the following results:

a.Management thinks that a 5 percent reduction in the unit sales price and a $31,000 increase in fixed advertising costs will create a 30 percent increase in unit sales.Assess this proposal and make a recommendation on what action should be taken.
b.Assume that the marketing manager thinks that the unit sales price and advertisement costs should not be changed.Instead,he recommends a $0.40 per unit increase in sales commissions to generate the 30 percent increase in unit sales and a 20 percent increase in operating income.This results in reduction of fixed costs to a certain extent.
Assess this proposal.