The Lublock Specialty, Inc., manufactures a product which sells for $5.At present the company produces and sells 50,000 units per year. Unit variable manufacturing and selling expenses are $2.50 and $0.50, respectively. Fixed costs are $70,000for factory overhead and $30,000for selling and administrative activities. The sales manager has proposed that the price be increased to $6. To maintain the present sales volume, advertising must be increased. The company's profit objective is 10 percent of sales.
Calculate (a)the additional expenditure the company can afford for advertising and (b)the new break-even point in units and in dollars, using the $6 selling price and the additional advertising outlay from part (a).