Data concerning Lemelin Corporation\'s single product appear below: Per Unit Per

Question

Data concerning Lemelin Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 230 100 % Variable expenses 115 50 % Contribution margin $ 115 50 % The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month. The marketing manager believes that an $11,000 increase in the monthly advertising budget would result in a 100 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Explanation / Answer

Hence net operating income would increase by=(224500-224000)=$500.

Current Proposed Sales (230*7000)=$1,610,000 (230*(7000+100)=$1,633,000 Less:VC (115*7000)=$805000 (115*(7000+100)=$816500 Contribution margin $805000 $816500 Less:Fixed cost (581000) (581000+11000)=(592000) Net operating income $224000 $224500.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

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