Original data: Assume that Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable costs are $7.00 per unit, and fixed costs total $165,000 per year.
Refer to the original data. Assume again that the company sold 39,000 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.40 per unit. He thinks that this move, combined with some increase in advertising, would increase annual sales by 35%. By how much could advertising be increased with profits remaining unchanged? (Do not prepare an income statement; use the incremental analysis approach.)
What is the amount by which advertising can be increased?