Advertising expenditures for rash and red-away


The price and promotion alternatives recommended for the two products by their respective brand managers included the possibility of using additional promotion or a price reduction to stimulate sales volume. A volume, price and cost summary for the two products as follows: Unit Price $2.00-$1.00, Unit variable costs 1.40-0.25, Unit contribution $0.60-$0.75, Unit volume,1,000,000 units-1,500,000 units.

Both brand managers included a recommendation to eiher reduce price by 10 percent or invest an incremental $150,000 in advertising. What absolut increase in nit sales and dollar sales will be necessary to recoup the incremental increase in advertising expenditures for Rash-Away and Red-Away, how many additional sales dollars must be produced to cover each $1.00 of inremental advertising and the total contribution dollars if the price of product is reduced by 10 percent?

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Finance Basics: Advertising expenditures for rash and red-away
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