Question

ABC Company produces two products, Product A and Product B. Information
on the two products for the most recent year appears below:

                              Product A           Product B  
selling price per unit           $22                 $17
variable costs per unit          $14                 $12
number of units sold           52,500 units        37,800 units

For the most recent year, fixed costs totaled $547,000.

ABC Company is considering investing in an advertising campaign that
will double the sales volume of Product B. It is ABC Company's goal
to increase next year's net income by 50% over the most recent year's
net income. Assume the sales of Product A are expected to decrease by
25% as some customers who are currently buying Product A will begin
purchasing Product B instead.

Calculate the maximum amount that ABC Company can spend on the
advertising campaign.

Answer 1