Diego Company manufactures one product that is sold for $ per unit in two geographic regionsEast and West. The following information pertains to the companys first year of operations in which it produced units and sold units.
Variable costs per unit:
Manufacturing:
Direct materials $
Direct labor $
Variable manufacturing overhead $
Variable selling and administrative $
Fixed costs per year:
Fixed manufacturing overhead $
Fixed selling and administrative expense $
The company sold units in the East region and units in the West region. It determined $ of its fixed selling and administrative expense is traceable to the West region, $ is traceable to the East region, and the remaining $ 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.
Assume the West region invests $ in a new advertising campaign in Year that increases its unit sales by If all else remains constant, what would be the profit impact of pursuing the advertising campaign?
