Data concerning Runnells Corporation 's single product appear below Per Unit Percent of Sales Selling price $160 100 Variable expense $80 50 Contribution margin $80 50 The company is currently selling 6,000 units per month Fixed expenses are $424,000 per month The marketing manager believes that a ...

Original Net Income 80 6000 424000 56000 per ...

Data concerning Runnells Corporation's single product appear below: Per Unit Percent of Sales Selling price .............. $160......

Question:

Data concerning Runnells Corporation's single product appear below:
Per Unit Percent of Sales
Selling price .............. $160...... 100%
Variable expense......... $80 ....... 50%
...... $80 ....... 50%
The company is currently selling 6,000 units per month. Fixed expenses are $424,000 per month. The marketing manager believes that a $7,000 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?
a. Increase of $8,000
b. Increase of $1,000
c. Decrease of $7,000
d. Decrease of $1,000
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...