Data concerning Runnells Corporation\'s single and sells a product. Data co cern

Question

Data concerning Runnells Corporation's single and sells a product. Data co cerning that product appear below: Percent of Sales Per Unit $140 70 $ 70 100% 50% 50% Variable expenses Contribution margin The company is currently selling 5,700 units per month. Fixed expenses are $342,500 per month. The marketing manager believes that a $6,700 increase in the monthly advertising budget would result in a 120 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 $6,700 O Increase of $8,400 O Decrease of $1700 O Increase of $1,700

Explanation / Answer

Incremental contribution = 120 units * 70 = 8400

Increase in advertising expense = 6700

Increase in net operating income = 8400 - 6700 = 1700

Correct choice D

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