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increase sales price per unit 30 percent which will cause sales volume to decline by 643119

(CVP analysis) Following are abbreviated income statements for two companies, Ainsley and Bard:

Ainsley

Bard

Sales

$2,000,000

$2,000,000

Variable cost

(1,400,000)

0

Contribution margin

$ 600,000

$2,000,000

Fixed cost

0

(1,400,000)

Operating income

$ 600,000

$ 600,000

Ainsley and Bard produce an identical product and both sell that product at $40.Both companies are searching for ways to increase operating income. Managers of both companies are considering three identical strategies. Consider each of the following strategies, and discuss which company is best situated to adopt that strategy.

a. Decrease sales price 30 percent to increase sales volume 60 percent.

b. Increase sales price per unit 30 percent, which will cause sales volume to decline by 15 percent.

c. Increase advertising by $200,000 to increase sales volume by 15,000 units.

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