Reference no: EM132543181
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?
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