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Fun Treats Inc. sell a variety of drink and food products including juice and ice cream. The segmented income statements for these two products are...
Fun Treats Inc. sell a variety of drink and food products including juice and ice cream. The segmented income statements for these two products are as follows:
Juice
Ice Cream
Sales
$500,000
$600,000
Variable expenses
200,000
300,000
Contribution margin
300,000
300,000
Traceable fixed expense
100,000
100,000
Segment margin
$200,000
$200,000
The company's management is considering a special advertising campaign that will run on a Saturday morning when many children are watching television. The advertising campaign is expected to cost $25,000 and only one product can be featured. In-house marketing studies show that the campaign could increase sales of the juice division by $100,000 or increase sales of the ice cream division by $100,000.
The marketing supervisor has decided that since both products have the same segment margin, the company will be equally as well off regardless of which product is featured.
- Agree or disagree with the marketing supervisor?
- Product that should be featured.
