Fun Treats Inc The Company's Management Is Considering a Special Advertising Campaign That

Essay

Fun Treats Inc.sells a variety of drink and food products including fruit juice and ice cream.The segmented income statements for these two products are as follows:
$\begin{array}{lcc}&\underline{\text { Frut Juice} } &\underline{ \text { Ice Cream }}\\\text { Sales } & \$ 500000 & \$ 600000 \\\text { Variable expenses } & \underline{200000} &\underline{ 300000}\\\text { Contribution margin } & 300000 & 300000 \\\text { Traceable fixed expense } &\underline{100000}&\underline{100000} &\\\text { Segment margin } &\underline{ \$ 200000 }&\underline{200000}\end{array}$

The company's management is considering a special advertising campaign that will run on a Saturday morning when many children are watching television.The advertising campaign is expected to cost $25 000 and only one product can be featured.In-house marketing studies show that the campaign could increase sales of the fruit juice division by $100 000 or increase sales of the ice cream division by $100 000.
The marketing supervisor has decided that since both products have the same segment margin,the company will be equally as well off regardless of which product is featured.
Required:
A. Do you agee ar disagee wrth the marketing sugervest? Why ar why not.
B. Which product do you feel should be featured? Show calculations to support your anfwer.