Analyzing Operational Changes

Operating results for department B of Shaw Company during 2016 are as follows:

Sales		$755,000
Cost of goods sold		480,000
Gross profit		275,000
Direct expenses		215,000
Common expenses		123,000
Total expenses		338,000
Net loss		$(63,000)

If department B could maintain the same physical volume of product sold while raising selling prices an average of 10% and making an additional advertising expenditure of $35,000, what would be the effect on the department's net income or net loss? (Ignore income tax in your calculations.)

Use a negative sign with your answer to indicate if the effect increases the company's net loss.

If Department B increased its selling price by 10%, the effect on net income (loss) would be $Answer