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Anna [14]
3 years ago
12

Data concerning Pellegren Corporation's single product appear below: Fixed expenses are $531,000 per month. The company is curre

ntly selling 4,000 units per month. The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $35,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should be the overall effect on the company's monthly net operating income of this change? Select one: a. decrease of $18,000 b. increase of $38,000 c. decrease of $38,000 d. increase of $58,000

Business
1 answer:
GrogVix [38]3 years ago
6 0

Answer:

a. decrease of $18,000

Explanation:

The calculation of overall effect on the company's monthly net operating income is shown below:-

<u>Particulars          Current                  Proposed </u>

Sales               $800,000                 $837,000

                     ($200 × 4,000) (200 - 14) × (4,000 + 500)

Variable

expenses          $160,000               $180,000

                     (40 × 4,000)              (40 × (4,000 + 500))

Contribution

margin              $640,000                $657,000

Fixed

expenses           $531,000                 $566,000

                                               ($531,000 + 350,00)

Net operating

income                  $109,000              $91,000

Decrease in net operating income is

= $109,000 - $91000

= $18,000

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2 years ago
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True or False: One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.
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Answer:

True

Explanation:

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3 0
3 years ago
Johnson Corporation unadjusted trial balance at year-end include the following accounts. Compute the uncollectible account expen
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Answer:

Explanation:

The journal entries are shown below:

A. Uncollectible Expense A/c Dr $11,520

            To Allowance for doubtful accounts A/c  $11,520

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The computation is shown below:

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The computation is shown below:

= $12,000 - $2,184

= $9,816

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