Question

How much will a company's net operating income change if it undertakes an advertising campaign given the following data: Cost of advertising campaign $ 25,000 Variable expense as a percentage of sales 42 % Increase in sales $ 60,000 A) $200 increase B) $25,200 increase C) $15,000 increase D) $9,800 increase

Answer 1

Answer:

Increase in net operating is $9,800

Explanation:

Computation table

Increase in sales                         $60,000

Less:Variable expense (42%)    $25,200

Increase in contribution             $34,800

Less:Cost of advertising            $ 25,000

Increase in net operating          $9,800