15. Data concerning Wythe Corporation\'s single product appear below Per Unit Pe

Question

15. Data concerning Wythe Corporation's single product appear below Per Unit Percent of Sales 100% Selling prioe Variable expenses $180 40% Fixed month. Th advertisin changes would increase monthly company's monthly net operating income of this change? expenses are $106,000 per month. The company is currently selling 2,000 units per e marketing manager would like to cut the selling price by $15 and increase the ng budget by $5,000 per month. The marketing manager predicts that these two sales by 800 units. What should be the overall effect on the A. decrease of $31,000 B. increase of $1,000 C. increase of $31,000 D. increase of $103,000

Explanation / Answer

Increase in contribution due to higher sale 800 units x ($135 - $90) = $36,000  
Less: Loss due to decrease in selling price 2,000 x $15 = $30,000
Less: Increase in advertising expense = $5,000
Increase/(Decrease) in Net operating income = $1,000

Option B. Increase of $1,000 is correct answer.

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