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Rock is sold to contractors who use the product in construction projects. Needs to increase sales by advertising. Spend $100,000 advertising campaign. currently sells 25,000 tons for a total revenue of $5,000,000.
Direct Labor...............$1,500,000
Variable production overhead...........200,000
fixed production overhead.................350,000

Selling and admministrative expenses
Variable...................................50,000
fixed........................................300,000
a. Compute break-even point in units (i.e. tons)
b. Compute the contribution margin ratio
c. will spend $100,000 on advertising and the company expects the advertising to increase sales by $200,000. Should the company increase advertising and Why?

 

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