How much will a company's net operating income change if it undertakes an advertising campaign given the following dа ta: Cost of advertising campaign$25,000 Variable expense as a percentage of sales 42% Increase in sales$60,000

Question

Rowdy

Business

13 September, 08:09

How much will a company's net operating income change if it undertakes an advertising campaign given the following dа ta: Cost of advertising campaign$25,000 Variable expense as a percentage of sales 42% Increase in sales$60,000

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Kaiden Elliott · Answer 1

Effect on income = $9,800

Explanation:

Giving the following information:

Cost of advertising campaign $25,000

Variable expense as a percentage of sales 42%

Increase in sales $60,000

We need to calculate the effect on income. The increase in sales will increase the income, but, the marketing campaign and the variable cost will decrease it.

Effect on income = Increase in sales - increase in variable costs - advertising cost

Effect on income = 60,000 - (60,000*0.42) - 25,000 = $9,800