The following information applies to the questions displayed below You have been
ID: 2333155 • Letter: T
Question
The following information applies to the questions displayed below You have been given the data below for some company: Percent of Sales 100% 70% 30% Per Unit Selling price Variable expenses $ 70 49 Contribution margin $ 21 Each month the company has fixed expenses of $74,000. Each month the company is selling 4,400 units. value: 3.00 points Required: 1-a. The company has asked you to calculate the increase or decrease in net operating income if there is an Increase in the monthly advertising budget of S9,800 that would result in an increase in monthly sales of $24,000. opera 1-b. Should the advertising budget be increased? Yes NoExplanation / Answer
Answer 1-a.
Contribution Margin Ratio = 30%
Increase in Sales = $24,000
Increase in Fixed Expenses = $9,800
Increase (Decrease) in Net Operating Income = Increase in Sales * Contribution Margin Ratio - Increase in Fixed Expenses
Increase (Decrease) in Net Operating Income = $24,000 * 30% - $9,800
Increase (Decrease) in Net Operating Income = $7,200 - $9,800
Increase (Decrease) in Net Operating Income = -$2,600
Net Operating Income will decrease by $2,600
Answer 1-b.
No, advertising budget should not be increased.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.