Question
Due to erratic sales of its sole producta high-capacity battery for laptop computersPEM, Inc., has been experiencing difficulty for some time. The companys contribution format
Due to erratic sales of its sole producta high-capacity battery for laptop computersPEM, Inc., has been experiencing difficulty for some time. The companys contribution format income statement for the most recent month is given below: Sales (13,100 units $40 per unit) $ 524,000 Variable expenses 262,000 Contribution margin 262,000 Fixed expenses 292,000 Net operating loss $ (30,000) . The president believes that a $6,500 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $81,000 increase in monthly sales. If the president is right, what will be the effect on the companys monthly net operating income or loss? (Use the incremental approach in preparing your answer.)
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