Question

If a company sells its smart phones for $400 and the phones have a COGS of $250, how many additional phones would the company have to sell if it decided to spend an extra $150,000 on advertising to promote the phones

Answer 1

Answer:

Units to be sold= 1,000

Explanation:

Giving the following information:

Selling price= $400

COGS= $250

Increase in costs= $150,000

To calculate the number of units to be sold to cover the incremental costs, we need to use the following formula:

Units to be sold= increase in costs/ contribution margin per unit

Units to be sold= 150,000 / (400 - 250)

Units to be sold= 1,000