EBK CENTURY 21 ACCOUNTING: GENERAL JOUR
EBK CENTURY 21 ACCOUNTING: GENERAL JOUR
10th Edition
ISBN: 9781337341523
Author: LEHMAN
Publisher: YUZU
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Assume that each year, a company normally produces and sells 80,000 units of its only product for $40 per unit. The company's average unit costs at this level of activity are given below: Direct materials: $9.50 Direct labor: $10.00 Variable manufacturing overhead: $2.80 Fixed manufacturing overhead: $5.00 Variable selling expenses: $1.70 Fixed selling expenses: $4.50 Total cost per unit: $33.50 The company's relevant range of production is 70,000 - 100,000 units. It believes that spending an additional $235,000 on advertising would increase unit sales by 25%. What is the financial advantage (disadvantage) of spending the additional money on advertising? a. $25,000 b. $19,000 c. $10,000 d. $85,000
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