Kuzio Corporation produces and sells a single product. Data concerning that prod
ID: 2606772 • Letter: K
Question
Kuzio Corporation produces and sells a single product. Data concerning that product appear below:
The company is currently selling 6,000 units per month. Fixed expenses are $263,000 per month. The marketing manager believes that a $5,000 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?
Multiple Choice
decrease of $5,000
increase of $7,280
increase of $2,280
decrease of $2,280
Per Unit Percent of Sales Selling price $ 130 100 % Variable expenses 78 60 % Contribution margin $ 52 40 %Explanation / Answer
Overall effect on the company's monthly net operating income = (140*52)-5000= 2280 Increase of $2,280 is the correct option
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