Question

The Clyde Corporation's variable expenses are 35% of sales. Clyde Corporation is contemplating an advertising campaign that will cost $28,000. If sales increase by $89,000, the company's net operating income will increase by:

Answer 1

Answer:

$29,850

Explanation:

The computation of the increase in net operating income is shown below:

= Increase in sales - increase in variable expenses - advertising cost

where,

Increase in sales = $89,000

Increase in variable expenses is

= $89,000 × 35%

= $31,150

And, the advertising cost is $28,000

So, the increase in operating income is

= $89,000 - $31,150 - $28,000

= $29,850