Larita Corporation produces and sells a single product. Data concerning that pro

Question

Larita Corporation produces and sells a single product. Data concerning that product appear below: Per Unit 200 it Percent of Sales Selling price Variable expenses 100% 40% 60% 80 Contribution margin 120 Fixed expenses are $350,000 per month. The company is currently selling 4,500 units per month. The marketing manager believes that a $26,000 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales Required: What should be the overall effect on the company's monthly net operating income of this change? (Negative amount should be indicated by a minus sign.) Change in net operating income 26

Explanation / Answer

Change in Net Operating Income = 190 x $120 - $26,000

= $22,800 - $26,000

= $3,200 Decrease

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