If this is done then we would split the £32,000 administrative costs between the two. This scenario could also lead to more costs based on how much an employee costs in these areas compared with the costs in Nottingham. If the costs in Nottingham are lower than Leicester and Loughborough then the administrative costs would be much higher. Closing a division would mean firing employees and this might not make the company look too good.
If we close the division and outsource the raspberry jam then we would be paying £20.6 for each batch and our profit would be £11.4 per batch. If we still sold 6250 batches then our total profit would be £71,250. We would save the costs of fruit, sugar, labour, variable costs, and some overhead. This could equal up to £109,000 in savings and could lead to some significant profit. We could then use this profit for other things or even for expanding the other two products.
Advertising would create more customer awareness and possibly increase the demand for the product. The first thing we would need to consider would be how much we will be spending on this campaign. We do not want to overspend and receive nothing in return. If we have a decent budget for the advertising campaign we can then choose where best to spend our money. We would also need to decide how to advertise. We could use the papers, magazines, radio, or even television. Of course television is the most expensive of the choices but might be the one that reaches the most people. If we could put together a good campaign then we would need to make sure that we increase the demand by enough to cover the campaign. It would be very difficult to figure out how much our sales would increase and if we are unable to predict how much sales would increase then we would have a hard time predicting how much our distribution costs will change. Even if the campaign increased