Question

Help Save & Exit Submit Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit $130 Percent of Sales 1008 509 Selling price Variable expenses Contribution margin $ 65 The company is currently selling 6,000 units per month. Fixed expenses are $214,000 per month. The marketing manager believes that a $7.200 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 O o increase of $1,900 O o increase of $9,100 O o decrease of $7.200

Answer 1

Option A is correct inerease of f1900 Calculation: 6,000units 6,140 units 80, 000 798, 200 3.90,000 399,100 $390,000 39 9,1 00 4214,000 2a1,2 00 $176,000 1,900 dales Lers Variable expenses Condribution Margin Less: pixed tx penses Net operating iauome Currently 6,000 units edales Unit: Afster inerease 6,000 units + 140 units 6, 140 units Selting Price PerUnit x Units odord - 6,000 units x 130 per unit $780,000 Sales dales (for 6,000 units) 11 dales (Por 6,14o units) 6,140units x. 130 per unit 798,200 Variable ost Per unit x Units so l Variable cxpenms $ 65x 6,000 units por 6,000 unts: Variable expenses 390,000 65x 6,140 units $399,100 for 6,140 units: Vaniable txpenses fixed expenser Por 6,40 units fixed Cxpenses 214,000 t 47,200 = f221,200

Inerease (becreae) in peracting income 177,900 41,900 net $176,000