Dybala Corporation produces and sells a single product. Data concerning that pro

Question

Dybala Corporation produces and sells a single product. Data concerning that product appear below: Per Unlt Percent of Sales 100 % 70 % 30% $130 Selling price Variable expenses Contribution margin 91 The company is currently selling 6,200 units per month. Fixed expenses are $220,000 per month. The marketing manager believes that a $6,700 increase in the monthly advertising budget would result in a 240 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change? O decrease of $2.,660 O increase of $9,360 O decrease of $6,700 O increase of $2,660

Explanation / Answer

Hence increase in net operating income=(24460-21800)=$2660.

Hence the correct option is D.

Current Proposed Sales (130*6200)=$806000 130*(6200+240)=837200 Less:Variable costs (91*6200)=$564200 91*(6200+240)=$586040 Contribution margin $241800 $251160 Less:Fixed costs 220,000 (220000+6700)=$226700 Net operating income $21800 $24460.

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