Question

Check my work 15 Required information The Foundational 15 [LO6-1, LO6-2, LO6-3, LO6-4, LO6-5 Part 15 of 15 [The following information applies to the questions displayed below, Diego Company manufactures one product that is sold for $81 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 52,000 units and sold 47,000 units points Variable costs per unit: Manufacturing eBook Direct materials 20 Direct labor 20 Variable manufacturing overhead Variable selling and administrative Fixed costs per year Fixed manufacturing overhead Fixed Belling and administrative expense 4 6 Print 936,000 552,000 References The company sold 35,000 units in the East region and 12,000 units in the West region. It determined that $260,000 of its fixed selling and administrative expense is traceable to the West region, $210,000 is traceable to the East region, and the remaining $82,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. Foundational 6-15 15. Assume the West region invests $42,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign? Profit will

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Answer 1

Selling price	81
Less: Variable cost per unit	50	=20+20+4+6
Unit Contribution margin	31
15
Increase in Contribution margin of West	74400	=12000*20%*31
Less: Advertising costs	-42000
Net change in Profit	32400
Profit will increase by 32400