Problem 9-20 Two investment advisers are comparing performance. One averaged a 16% rate of return and the other a 15% rate of re
1 answer:
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Answer:
Answer is in table which is attached in the attachment. Please refer to the attachment.
Explanation:
<em>Calculations:</em>
Status quo: Revenue 30* 200= 6000, VC 30*20= 4000, CM 6000-4000= 2000, 2000-3000= -1000 (Contribution Margin – fixed cost = Profit/Loss)
(b) Since the loss is less in Advertising even after $300 cost of advertisement, so we would choose the option 3 for advertising.
(c). In order to survive in the period of recession, a business needs cash and reducing operation expenses can do it better. This business is in loss from last three months so it might be useful to shut down the business for some period.
