h Dis ail (1) Personal Calendar Cost/Managerial Ac O accurately costed Question

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h Dis ail (1) Personal Calendar Cost/Managerial Ac O accurately costed Question 1.3 Gaston Company's accountant has prepared the following budget data for the year: sales equal 150,000 units; selling price is $25 per unit; variable expenses equal $15 per unit, fixed ntanufacturing expenses equal $800,000; and fixed selling and administrative expenses total $700,000. Gaston's president is the budget and has discussed his concern with a friend who owns an advertising agency. His friend convinces him that an aggressive advertising campaign would increase units sold by 20%, and increase the selling price per unit by 4%. If Gaston chooses to pay $280,000 to implement the advertising program and the anticipated increase in units sold and selling price per unit actually occur, operating income would: O increase by $200,000; O decrease by $280,000; increase by $20,000; increase by $480,000. 4 point Question 1.4 usE TuE FOLL OWING TO ANSWER QUESTIONS 4 AND 5:

Explanation / Answer

Current Advertising program Per unit 150000 units Per unit 180000 units Sales revenue 25 3750000 26 4680000 Variable costs 15 2250000 15 2700000 Contribution margin 1500000 1980000 Fixed costs: Manufacturing expenses 800000 800000 Selling and administrative expenses 700000 700000 Advertising 280000 Total fixed expenses 1500000 1780000 Net operating income 0 200000 Option 1 increase by $200000 is correct

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