Answer:
The correct answer is C.
Explanation:
Giving the following information:
Sales= 250,000
Variable costs= 150,000
Fixed costs= 50,000
Expected production and sales in units= 3,500 units
The sales manager believes that sales could be increased by 500 units if advertising expenditures were increased by $14,000.
<u>To calculate the effect on income, we need to calculate the total contribution margin increase and deduct from it the increase in fixed costs.</u>
First, we need to calculate the unitary contribution margin:
Unitary contribution margin= selling price - unitary variable cost
Unitary contribution margin= 250,000/3,500 - 150,000/3,500= $28.57
Effect on income= 500*28.57 - 14,000= $285 increase