Question

Mark from Mark's Mowers wants to make some changes to his business. He has asked each of his department managers (Production, Marketing and Sales) to submit a plan for growth to you the General Manager.

Currently Mark is selling 500 lawn mowers a month at $250 each. His variable cost per lawnmower is $180 each. His fixed cost per month are $ 25,000.

For purposes of this project assume that each scenario is within the relevant range (no larger space is needed, no additional people will be needed, and no additional fixed cost will be necessary.  

The Marketing Department is considering three different alternatives.  How much money will Mark make in each of the separate situations and Which of the scenarios is best and why?

1. Do $5,000 in advertising. The Marketing department believe this would increase sales by at least 35 units.  

2. Do $ 10,000 in advertising. The Marketing department believe this would increase sales by at least 65 units.

3. Do $ 6,000 in advertising combined with a "sales" price of $225 (a 10% discount). The believe that this would increase sales by at least 50 units.

Answer 1