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27 February, 01:33

Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 130 100 % Variable expenses 65 50 % Contribution margin $ 65 50 % The company is currently selling 4,900 units per month. Fixed expenses are $208,000 per month. The marketing manager believes that a $6,700 increase in the monthly advertising budget would result in a 170 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. 27 February, 01:58
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    Increase in net operating income: $114,850 - $110,500 = $4,350

    Explanation:

    Kuzio Corporation

    Sales (4,900 units, 5,070units * $130) $637,000 $659,100

    Variable expenses ($637,000 $659,100 * 50%) $318,500 $329,550

    Contribution margin $318,500 $329,550

    Fixed expenses $208,000 $214,700

    Net operating income $ 110,500 $114,850

    Increase in net operating income: $114,850 - $110,500 = $4,350

    The overall effect on the company's monthly net operating income of this change is $4,350
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