Question

Requirement 3. The company marketing vice president believes a new sales promotion that costs $ 140 comma 000 would increase sales to 220 comma 000 goggles. Should the company go ahead with the​ promotion? Give your reason. Use the contribution margin income statement format to evaluate the sales promotion. Increase in contribution margin Increase in fixed expenses Increase in operating income

Answer 1

Revenue = 240000×49= 11,760,000

Variable manufacturing expense = 240000×20 = 4,800,000

Sales commission expense = 240000×8 =1,920,000

Fixed manufacturing overhead = $2,400,000

Fixed operating expenses = 245,000

Sales promotion = 140000

Profit = 2,255,000