Management has the opportunity to investinmonthly

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Molly's Cupcakes managementistrying to decide whetherto stay in business. They are currently losing money andwantto know how close they are to making a profit and whether they should investin advertising.

Molly's provided the following information: Revenue $34,000? Expense 37,100 Profit(loss) <$3,100>

Managementresponded with the following information:

Costs have beenmatched to revenue to determine what costsshould appear as expenses.
The costs of goodsremaining in inventory are notincluded in expenses.
There are no fixedmanufacturing costs.
Cost ofsalesis 40% ofrevenue.
$8,500 ofthe selling and administrative expenses are variable.
Costs and selling prices are expected to remain stable for atleastthe nexttwo years.

Management wantsto know how close they are tomaking a profit. Compute the increase in revenue required for Molly'sto break even.

Management has the opportunity to investinmonthly advertising. This advertising is expected to increase sales volume by 25%. What is the most it should be willing to pay for this advertising?

Reference no: EM13587654

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