Question
Houpe Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price................. $140 100% Variable expenses........
Houpe Corporation produces and sells a single product. Data concerning that product appear below:
Per Unit | Percent of Sales | ||
Selling price................. | $140 | 100% | |
Variable expenses........ | 42 | 30% | |
Contribution margin...... | $98 | 70% |
Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. Consider each of the following questions independently. What is the amount of change and whether you consider it to be and increase or decrease to operating income.
The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect (including the dollar amount) on the company's monthly net operating income of this change?
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