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Generate the highest profits

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Reference no: EM131942713

Forsman, Inc. has sales of $10,000,000. The contribution margin is 40% and the fixed costs are $1,000,000. The price per unit is $10. The company is considering two different strategies for increasing their profits:

  1. Spend $800,000 in advertising. The result is expected to increase the company's sales by 50%.
  2. Reduce the price by 20%. The price-demand elasticity is 2.0.

Which of the two strategies will generate the highest profits?

Reference no: EM131942713

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