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Chovanec Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales $ 170 100 % Selling price
Chovanec Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales $ 170 100 % Selling price Variable expenses Contribution margin 68 40 % $ 102 60 % Fixed expenses are $521,000 per month. The company is currently selling 7,000 units per month. Management is considering using a new component that would increase the unit variable cost by $6. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change? A) decrease of $48,000 B) decrease of $6,000 C) increase of $48,000 D) increase of $6,000 How much will a company's net operating income change if it undertakes an advertising campaign given the following data: Cost of advertising campaign Variable expense as a percentage of sales $ 25,000 Increase in sales 42 % $ 60,000 A) $200 increase B) $25,200 increase C) $15,000 increase D) $9,800 increase
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