Question

A. the marketing manager argues that a $9,000 increase in the monthly advertising budget would increase monthly sales by $20,000. calculate the increase or decrease in net operating income. 1-b. should the advertising budget be increased?

Answer 1

If the new advertising will cost $9,000 more, but will increase revenues by $20,000 there would be a $11,000 increase in net operating income.

In this case, since the revenue outweighs the cost, you would increase the advertising expenditure.