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Makovka662 [10]
3 years ago
10

he company is currently selling 6,400 units per month. Fixed expenses are $424,400 per month. The marketing manager believes tha

t a $6,600 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?
Business
1 answer:
kumpel [21]3 years ago
7 0

Answer:

The company's net operating income would increase by 2.1875%.

Explanation:

Let the selling price for each unit be $y

Initial quantity sold per month before increase in the advertising budget = 6400 units

Initial income = $6400y

New monthly sales after increase in advertising budget = 6400 + 1400 = 6540 units

New income = $6540y

Increase in income = $6540y - $6400y = $140y

Percentage increase in income = (increase in income ÷ initial income) × 100 = ($140y ÷ $6400) × 100 = 0.021875 × 100 = 2.1875%

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Answer:

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The theory of Comparative Advantage is a theory of international trade and it comes into effect in a situation where the <u>opportunity cost of producing a good or offering by a service by a country is lower than that of other countries. </u>

Specifically, to understand the theory of comparative advantage the opportunity cost of production or offering a service has to be measured in terms of the trade off between those countries. It simply means when a country has the comparative advantage then it derives more benefits from other countries buying its products as compared to buying their products and vice versa.

In the question, the European Union has the Comparative advantage over South Africa because the trade-off between buying South Africa's edible fruits and nuts and selling other products to South Africa benefits the European countries.

European countries derive more benefits because South Africa buys their goods at a cost higher than it takes them to produce while they buy at the normal cost from South Africa. The <u>trade-off benefits Europe </u>

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