Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Per unit Percent of Sales
Selling price $90
Variable expenses 63
Contribution margin $27
Fixed expenses are $30,000 per month and the company is selling 2,000 units per month.
First, we need to calculate the actual income:
Sales= 2,000*90= 180,000
Variable cost= 2,000*63= (126,000)
Contribution margin= 54,000
Fixed costs= (30,000)
Net operating profuit= 24,000
A) Effect on income= increase in sales - increase in costs
Effect on income= 100units* (90 - 63) - 5,000= -2,300
B) The effect of increasing the advertising budget is not positive. Income suffers a decrease. It is not profitable.
C) New sales= 2,200
New variable cost= 65
Effect on income= 2,200*(90 - 65) - 30,000= 25,000
The change in higher-quality components should be made. It increases the profit by $1,000
