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Read Case 11-3. Choose the best strategy and justify your decision based on appropriate accounting...

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Accounting

Read Case 11-3. Choose the best strategy and justify your decision based on appropriate accounting principles.
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Haley: I think we need to think of some way to increase our profitability. Do you have any ideas? Dam: Well, I think the best strategy would be to become aggressive on price. Haley: How aggressive? Dam: If we drop the price to $60 per unit and maintain our advertising budget at $15,000,000, 1 think we will generate sales of 2,000,000 units. Haley: I think that's the wrong way to go. You're giving too much up on price. Instead, I think we need to follow an aggressive advertising strategy. Dan: How aggressive? Haley: If we increase our advertising to a total of $20,000,000, we should be able to increase sales volume to 1,200,000 units without any change in price. Dam: I don't think that's reasonable. We'll never cover the increased advertising costs. Which strategy is best: Do nothing? Follow the advice of Dan Gillespie? Or follow Haley Chipana's strategy

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