Question

Marino company is currently selling 10,000 units of its product per month at $10.40 per unit for total monthly sales of $104,000. the company's variable expenses are $4.20 per unit and its monthly fixed expenses total $10,400. an increase in the advertising budget of $4,400 is expected to increase its monthly sales by 1,000 units for total monthly sales of $114,400. this proposal will cause net operating income to:

Answer 1

The total income of the company will be 114.400$ after a month. Hence, to find the net operating income, we need to subtract from it the various costs. The cost per product is 4.20$. Hence, since we have that 10000+1000 products are sold (+1000 through ads), the total cost of these is 11000*4.20=46.200$. We also have that there is a fixed monthly cost of 10.400$ and a budget for advertisement of 4.400$. Hence, the total cost is 46.200+10400+4400=61000$. Now, we need to subtract this total cost from our income. NOI=114.400-61000=53.400$ where NOI stands for Net operating income.