Question

O'Neill, Incorporated's income statement for the most recent month is given below. The marketing department believes that a promotional campaign at Store A costing $5,000 will increase sales by $15,000. If its plan is adopted, overall company net operating income should: Select one: a. decrease by $800 b. decrease by $5,800 c. increase by $5,800 d. increase by $10,000

Answer 1

Answer:

$1,800

Explanation:

Here Decrease or increase can be calculated as under:

Increase in Revenue                                                           $15,000

Increase in Variable Cost (72k / 100k * $15,000)             ($10,800)

Increase in Promotional Cost                                            ($6,000)  

Net Operating Income Decrease                                        ($1,800)

Hence the decrease in Net Operating Income would be by $1,800.

Note: As the complete question is not provided and is not found online, almost similar question was picked from the internet. So make sure you account for of the differences.

The Numerical section of the question is given as under: