Harding Company expected sales to be 50,000 units in February,45,000 in March,and 55,000 units in April.Each unit sells for $18.00 each.The following costs pertain to each unit: Harding is considering an advertising campaign which will cost $15,000 per month from January to March and is expected to increase sales by 8% a month.At the same time Harding will reduce sales prices to $17.00 per unit while keeping costs steady.
Required:
(A.)What will operating income be in each of the three months before the advertising campaign?
(B.)If Harding goes ahead with the advertising campaign,how much would operating income increase or decrease each month? Would you advise them to go ahead with the campaign?

Question

Harding Company expected sales to be 50,000 units in February,45,000 in March,and 55,000 units in April.Each unit sells for $18.00 each.The following costs pertain to each unit:  Harding is considering an advertising campaign which will cost $15,000 per month from January to March and is expected to increase sales by 8% a month.At the same time Harding will reduce sales prices to $17.00 per unit while keeping costs steady.
Required:
(A.)What will operating income be in each of the three months before the advertising campaign?
(B.)If Harding goes ahead with the advertising campaign,how much would operating income increase or decrease each month? Would you advise them to go ahead with the campaign?

Quizplus · Accepted Answer

The Answer of Harding Company expected sales to be 50,000 units in February,45,000 in March,and 55,000 units in April.Each unit sells for $18.00 each.The following costs pertain to each unit:  Harding is considering an advertising campaign which will cost $15,000 per month from January to March and is expected to increase sales by 8% a month.At the same time Harding will reduce sales prices to $17.00 per unit while keeping costs steady.
Required:
(A.)What will operating income be in each of the three months before the advertising campaign?
(B.)If Harding goes ahead with the advertising campaign,how much would operating income increase or decrease each month? Would you advise them to go ahead with the campaign?

Harding Company Expected Sales to Be 50,000 Units in February,45,000