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7. The sales manager at Drake Company is convinced that a $30,000 expenditure on advertising will increase unit sales by 50% without any other increase
7. The sales manager at Drake Company is convinced that a $30,000 expenditure on advertising will increase unit sales by 50% without any other increase in fixed expenses. The sales manager has asked you, the Chief Financial Officer, to determine what the impact will be on the companys net operating income if he is correct. Drake Companys contribution format income statement for the most recent year is below. Show all of your work. (10 points) Sales (13,000 units) $325,000 Variable expenses 221,000 Contribution Margin 104,000 Fixed Expenses 117,000 Net operating loss $( 13,000)
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