Data concerning Lemelin Corporation\'s single product appear below: Per Unit Per

Question

Data concerning Lemelin Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 230 100 % Variable expenses 115 50 % Contribution margin $ 115 50 % The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month. The marketing manager believes that an $11,000 increase in the monthly advertising budget would result in a 100 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Multiple Choice

increase of $11,500, increase of $500, decrease of $11,000, decrease of $500

Explanation / Answer

Effect on monthly sales :

So answer is b) Increase of $500

Sales (100*230) 23000 Variable expense (1100*115) -11500 Contribution margin 11500 Fixed expense -11000 Net operating income 500

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