Zeeb Corporation produces and sells a single product. Data concerning that produ

Question

Zeeb Corporation produces and sells a single product. Data concerning that product appear below: Per unit Percent of sales Selling Price--------------------------------------------- $150 100% Variable Expenses-------------------------------------- 60 40% -------------------------- Contribution margin------------------------------------ $90 60% Fixed expenses are $355,000 per month. The company is currently selling 5,000 units per month. Required: The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 160 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change? Show your work!

Explanation / Answer

Additional sales (160 units x $150)          = $24000

Less: Variable cost (160 units x $60)       = $9600

Less: Additional advertising expenses    = $12000

Increase in net operating income           = $2400

Thus company's monthly net operating income will be increased by $2400

Related Questions

Navigate

• Browse (All)
• Browse Z
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.