Reference no: EM13602796

The group product manager for ointments at American Therapeutic Corporation was reviewing price and promotion alternatives for two products: Rash Away and Red Away. both Products were designed to reduce skin irritation, but red away was primarily a cosmetic treatment where as rash away also included a compound that eliminated the rash.

The price and promotion alternatives recommended for the two products by their respective brand mangers included the possibility of using additional promotion or a price reduction  to stimulate sales volume. A volume, price, and cost summery for the products is as follows.

                                              Rash Away                         Red Away

Unit Price                                $2.00                                  $1.00

Unit Variable Costs                   $1.40                                 $0.25

Unit Contribution                      $0.60                                  $0.75

Unit Volume                             1,000,000                            1,500,000

Both Brand Managers included a recommendation to either reduce price by 10 percent or invest an incremental $150,000 in advertising.

B-How many additional sales dollars must be produced to cover each $1.00 of incremental advertising for Rash-Away? For Red Away?