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Find should finance department increase advertising budget

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Reference no: EM132547608

Choco ice cream is a local brand of United states. Its factory is located in louisville Kentucky. Due to CORONA PANDEMIC the sale of products is sharply decline which results heavy losses to the company. Following is the current situation of company's costing health.

Selling price per unit                              250

Variable cost per unit                            150

Contribution margin - Amount                 100

Contribution margin - Ratio                   40%

Fixed cost                                      35,000 per month

Current Sales (In units)                        400

The sales manager feels that by increase in $10,000 fixed cost i.e, advertising budget, the sale will increase by $30,000 to a total 520 units.

Question 1: Keeping in mind the current situation of COVID-19 and after doing CVP analysis, should finance department increase the advertising budget? In your opinion what is the alternative strategy if sales not increase?

Reference no: EM132547608

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