Question
In: Accounting
Use the following information to answer this question: per unit ratio Sales Revenue $250 Variable Costs...
Use the following information to answer this question:
|
per unit |
ratio |
|
|
Sales Revenue |
$250 |
|
|
Variable Costs |
$75 |
30% |
|
Contribution Margin |
$175 |
70% |
Fixed expenses are $910,000 per month. The company is selling 7,000 units. The marketing manager believes that a $65,000 increase in the monthly advertising budget would result in an 8% increase in monthly sales. What is the change on the company's monthly net operating income of this change?
Solutions
Expert Solution
| Present | Anticipated | |
| Contribution Margin | 7,000*$175 = $1,225,000 | (7,000*108%)*$175 = $1,323,000 |
| Less: Fixed expenses | $ 910,000 | $910,000+$65,000 = $975,000 |
| Operating income | $ 315,000 | $ 348,000 |
Increase in net operating income will be: $348,000 - $315,000 = $33,000
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ekkarill92 answered 1 year agoRelated Solutions
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