Data concerning Runnells Corporation\'s single and sells a product. Data co cern

Question

Data concerning Runnells Corporation's single and sells a product. Data co cerning that product appear below:

Per Unit Percent of Sales Selling price $140 100%

Variable expenses 70 50%

Contribution margin $ 70 50%

The company is currently selling 6,300 units per month. Fixed expenses are $385,300per month.

The marketing manager believes that a $6,700 increase in the monthly advertising budget would result in a 130 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Decrease of $6,700

Increase of $9,100

Increase of $2,400

Decrease of $2,400

Explanation / Answer

Answer Increase of $2,400

No Of Units Sold Currently Changed Circumstance Increase in net operating income 6300 6430 Contribution margin @70 441000 450100 Fixed Expense 385300 385300 Additional Advertisment Exp 6700 Net operating inocme 55700 58100 2400

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