Company are shown below: Per Unit Percent of Sales Selling price P1,500 100% Variable expenses 1,050 70% Contribution margin P450 30% Fixed expenses are P45,000 per month and the company is selling 200 units per month. Required: a. The marketing manager argues that a P10,000 increase in the monthly advertising budget would increase monthly sales by P45,000. Should the advertising budget be increased? (support your answer with computations) b. Refer to the original data. Management is considering using better quality of materials that would increase the variable cost by P75 per unit. The marketing manager believes the higher-quality product would increase sales by 10% per month. Should the better quality of materials be used? (support your answer with computations)
XYZ Company are shown below:
Per Unit Percent of Sales
Selling price P1,500 100%
Variable expenses 1,050 70%
Contribution margin P450 30%
Fixed expenses are P45,000 per month and the company is selling 200 units per month.
Required:
a. The marketing manager argues that a P10,000 increase in the monthly advertising budget would increase monthly sales by P45,000. Should the advertising budget be increased? (support your answer with computations)
b. Refer to the original data. Management is considering using better quality of materials that would increase the variable cost by P75 per unit. The marketing manager believes the higher-quality product would increase sales by 10% per month. Should the better quality of materials be used? (support your answer with computations)
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