Question

1. How much would the company’s profits increase (decrease) if it implemented the advertising campaign in the Medical Market?2. How much would the company’s profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?4. In Exercise 6–16, Minneapolis shows $48,000 in traceable fixed expenses. What happened to the $48,000 in this exercise?

Answer 1

Part 1:If the campaign is implemented in the Medical Market, the increase in profit is $ 9400.

Part 2: If the campaign is implemented in the Dental Market, the increase in profit is $ 11800.

Part 3: As the increase in profit is more in the dental market than in the medical market, the campaign should be focused in the Dental Market.

Part 4: The total traceable fixed expenses are ($12000+$21000=$33000) while the remaining $15000 are non traceable common expenses which cannot be related to the either markets.

Step-by-step explanation:

As the complete question is not given, the question as obtained from the search is included with the question as the image. From the data

As from the given data

For Part 1

Increase in Sales in Medical=I_s=$ 40,000

Contribution Margin=cm=36%

Cost of Campaign=C=$5000

So the Incremental Contribution Margin(I_cm) is given as

`I_(cm)=cm* I_s\\I_(cm)=36\%* 40000\\I_(cm)=\$14400\\`

Now the increase/decrease in profit is given as

`Profit_(change)=I_(cm)-C\\Profit_(change)=14400-5000\\Profit_(change)=\$9400\\`

So If the campaign is implemented in the Medical Market, the increase in profit is $ 9400.

For Part 2

Increase in Sales in Dental=I_s=$ 35,000

Contribution Margin=cm=48%

Cost of Campaign=C=$5000

So the Incremental Contribution Margin(I_cm) is given as

`I_(cm)=cm* I_s\\I_(cm)=48\%* 35000\\I_(cm)=\$16800\\`

Now the increase/decrease in profit is given as

`Profit_(change)=I_(cm)-C\\Profit_(change)=16800-5000\\Profit_(change)=\$11800\\`

So If the campaign is implemented in the Dental Market, the increase in profit is $ 11800.

For Part 3

As the increase in profit is more in the dental market than in the medical market, the campaign should be focused in the Dental Market.

For Part 4

For this exercise the total traceable fixed expenses are divided into 3 components as

Traceable expenses for the Medical Market: $12000

Traceable expenses for the Dental Market: $21000

Non Traceable Common Expenses: $15000.

So the total traceable fixed expenses are ($12000+$21000=$33000) while the remaining $15000 are non traceable common expenses which cannot be related to the either markets.