2. Firm X is about to launch a line of new athletic shoes and sets aside $300,000 for a new advertisement. The firm hired an advertisement agency and paid $50,000 and reserve space in a magazine, Road Runner. The price for the ad space is $250,000. If the firm cancelsthe reservation, it has to pay a cancellation fee of $50,000. The management forecasts that the advertisement would generate sales of 20,000 units. The unit contribution margin would be $20.

Recently, however, a major competitor launched a new line of athletic shoes. The firm now revises sales forecast downward to 14,000 units, with the unit contribution margin remaining the same. Should the firm cancel the launch?