Question

If price paper spends an additional on advertising, sales volume should increase by units. what effect will this have on operating income?

Answer 1

Disclaimer- The complete question is-

Prince Paper has budgeted the following amounts for its next fiscal year:

Total fixed expenses $300,000​

Selling price per unit $60​

Variable expenses per unit $25​

If Price Paper spends an additional $12,800 on advertising, sales volume should increase by 1000 units. What effect will this have on operating income?

If Price Paper spends an additional $12,800 on advertising, sales volume increases by 1000 units. The operating income will be 22,200.

Selling price per unit $60​ = 60(1000 units) = 60,000

Variable expenses per unit $25​ = 25(1000 units) = 25,000

FE advertising = 12800

Operating income = Total Revenue – Direct Costs – Indirect Costs

                              = 60,000 - 25,000 - 12800 = 22,200

To know more about operating income refer:

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