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22 May, 02:48

The Clyde Corporation's variable expenses are 35% of sales. Clyde Corporation is contemplating an advertising campaign that will cost $27,000. If sales increase by $88,000, the company's net operating income will increase by:

a. $30,800

b. $30,200

c. $3,800

d. $74,750

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Answers (1)
  1. 22 May, 02:58
    0
    The correct answer is B.

    Explanation:

    Giving the following information:

    The Clyde Corporation's variable expenses are 35% of sales. Clyde Corporation is contemplating an advertising campaign that will cost $27,000 and will increase sales by $88,000.

    Effect on income = Increase on income - variable costs - fixed costs

    Effect on income = 88,000 - (0.35*88,000) - 27,000 = $30,200
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