Answer:
1) Yes monthly advertising budget should be increased as it increases the sales by $ 9000 even then there would be profit of $ 4000
2) the net operating income will increase by (38,000-24,000) = $ 14,000
Explanation:
Given
Sales 2000 units for $ 90 = $ 180,000
Variable Expenses = $126,000
Contribution Margin = $ 54,000
Less Fixed Expenses = $ 30,000
Operating Income = $ 24,000
1) Yes monthly advertising budget should be increased as it increases the sales by $ 9000 even then there would be profit of $ 4000
2) the net operating income will increase by (38,000-24,000) = $ 14,000
Sales 2000 units for $ 99 = $ 198,000
Variable Expenses (63 +2= $65) = $130,000
Contribution Margin = $ 68,000
Less Fixed Expenses = $ 30,000
Operating income = $ 38,000
