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12 June, 04:00

The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month. The marketing manager believes that a $20,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change

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  1. 12 June, 04:29
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    The following data is missing in the question which is being reproduced;

    Selling price $140

    Variable Cost $28

    Contribution Margin $112

    Explanation:

    Increase in sale 180*140 $25,200

    Variable Cost 180*28 ($5,040)

    Net contribution margin $20,160

    Advertising expense-incremental ($20,000)

    Net Increase in operating income $160

    The net operating income will increase with just $160 because of this change.
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