Answer (C) is correct . Sales dollars must increase sufficiently to cover the $160,000 increase in advertising. The unit contribution margin for BD-4 is $.50 ($3 selling price – $2.50 variable costs), and the CMR is 1/6 (UCM ÷ $3 selling price). Dividing the $160,000 by 1/6 gives the sales dollars necessary to generate a CM of $960,000 ($160,000 ÷ 1/6 = $960,000).
Answer (A) is incorrect because A $1 increase in sales does not result in a $1 increase in profits. Variable costs of producing the units must be deducted in order to determine the contribution margin derived from each unit sold.
Answer (B) is incorrect because The number 320,000 is the number of sales units, not sales dollars, needed to offset the increased advertising costs.
Answer (D) is incorrect because Fixed manufacturing costs are not included in determining unit contribution margin.
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Suppose the sales manager chooses to devote the entire $160,000 to increased advertising for BD- The minimum increase in sales dollars of BD-4 required to offset the increased advertising would be
