Tressa Company produces combination shampoos and conditioners in individual- use bottles for hotels. Each bottle sells for $0.36. The variable costs for each bottle (materials, labor, and overhead) total $0.27. The total fixed costs are $54,000. During the most recent year, 830,000 bottles were sold. The president of Tressa, not fully satisfied with the profit performance of the shampoo, was considering the following options to increase profitability:
(1) increase promotional spending; (2) increase the quality of the ingredients and, simultaneously, increase the selling price; (3) increase the selling price; and (4) combinations of the three.
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