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Tech- Media buys its product for $ 90 and sells it for $ 200 per unit. The sales staff receives a 12% com-mission on the sale of each unit. Its June income statement follows. Problem 20- 4B Preparation and analysis of
TECH- MEDIA COMPANY
Management expects June’s results to be repeated in July, August, and September without any changes in strategy. Management, however, has another plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with July) if the item’s selling price is reduced to $ 180 per unit and advertising expenses are increased by 20% and remain at that level for all three months. The cost of its product will remain at $ 90 per unit, the sales staff will continue to earn a 12% commission, and the remaining expenses will stay the same.