Disclaimer- The complete question is-
Prince Paper has budgeted the following amounts for its next fiscal year:
Total fixed expenses $300,000
Selling price per unit $60
Variable expenses per unit $25
If Price Paper spends an additional $12,800 on advertising, sales volume should increase by 1000 units. What effect will this have on operating income?
If Price Paper spends an additional $12,800 on advertising, sales volume increases by 1000 units. The operating income will be 22,200.
Selling price per unit $60 = 60(1000 units) = 60,000
Variable expenses per unit $25 = 25(1000 units) = 25,000
FE advertising = 12800
Operating income = Total Revenue – Direct Costs – Indirect Costs
= 60,000 - 25,000 - 12800 = 22,200
To know more about operating income refer:
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