Question
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows:
Sales $ 3,000,000 Variable expenses 1,500,000 Contribution margin 1,500,000 Fixed expenses 160,000 Net operating income $ 1,340,000 The sales manager is convinced that a 14% reduction in the selling price, combined with a $64,000 increase in advertising, would increase this year's unit sales by 25%.
If the sales manager is right, what would be this year's net operating income if his ideas are implemented?
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows:
| Sales | $ | 3,000,000 |
| Variable expenses | 1,500,000 | |
| Contribution margin | 1,500,000 | |
| Fixed expenses | 160,000 | |
| Net operating income | $ | 1,340,000 |
| The sales manager is convinced that a 14% reduction in the selling price, combined with a $64,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? | ||
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
978-0078025624
