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ArbitrLikvidat [17]
3 years ago
15

Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Sell

ing price $ 150 100 % Variable expenses 75 50 % Contribution margin $ 75 50 % The company is currently selling 5,600 units per month. Fixed expenses are $194,000 per month. The marketing manager believes that a $5,300 increase in the monthly advertising budget would result in a 190 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:
rusak2 [61]3 years ago
3 0

Answer:

<em>Net operating income  $8,950</em>

Explanation:

<em>The overall impact on the net operating income is the amount of increase in contribution from the addtional sales less the increase in monthly advertising budget. </em>

<em>                                                          $</em>

Contribution = ($75 × 190) =     14,250

Fixed cost - advertising       <u>    ( 5,300)   </u>    

Net operating income          <u>     8950</u>

Please, note that the fixed costs of $194,000 per month are not relevant for this decision. Simply because they would be incurred either way and that are not completely traceable to the increase sales.

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Glad I could help!

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