Answer:
Net Operating income after change is $25,000
Explanation:
Increase in price will increase the sales value, it will increase the contribution margin as well. Increase in advertisement expense will be added to fixed cost. which will decrease the net profit by $5000. Net effect will be $5000 of profit.
Increase in Price = $110 + $10 = $120
Fixed Cost = $30,000 + $5,000 = $35,000
Sales $120,000 1000 units @ $120 100 %
Variable expenses $60,000 1000 units @ $60 50 %
Contribution margin $60,000 1000 units @ $60 50 %
Fixed expenses $35,000
Net operating income $25,000
* Data for the question was missing following data has been used from the similar question
Selling price $110,000 1000 units @ $110 100 %
Variable expenses $60,000 1000 units @ $60 55 %
Contribution margin $50,000 1000 units @ $50 45 %
Fixed expenses $30,000
Net operating income $ 20,000
