Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Question
Consider the non-linear model:
sales = a + b * exp (c * advertising_spend).
Where a represents baseline sales, b is a scaling factor, and c is the growth rate of sales in response to advertising spend. If c = 0.03, by how much would sales increase on average for a $10,000 increase in advertising spend from an initial spend of $50,000?
Additionally, consider if diminishing returns begin to take effect.
What is the percentage increase in sales for the $10,000 increase from $50,000 to $60,000?
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