ABC Technologies Inc manufactures baseball bats The bats cur

ABC Technologies, Inc manufactures baseball bats. The bats currently sell for $65. The variable costs are $42 per bat to manufacture and the fixed costs are $90,000. Determine the following

e) The company spent an additional $14,000 for an extensive advertising campaign. If the advertising campaign resulted in additional sales of 570 units, was the campaign profitable? An actual dollar amount must be provided. Assume the original information included her (i.e. $65 selling price, $42 variable cost, and fixed costs of $90,000).

Solution

Incremental profit or (loss):

= Incremental revenue – Incremental cost

= 570×$65-570×$42-$14,000

= ($890)

No, campaign is not profitable.