Jen and Barrys ice cream shop charges $1.45 for a cone. Variable expenses are $0.33 per cone, and fixed costs total $2,000 per month. A Valentines Day promotion is being planned for the second week of February. During this week, a person buying a cone at the regular price would receive a free cone for a friend. It is estimated that 700 additional cones would be sold and that 900 cones would be given away. Advertising costs for the promotion would be $130. Required: Calculate the effect of the promotion on operating income for the second week of February. Do you think the promotion should occur?

Jen and Barrys ice cream shop charges $1.45 for a cone. Variable expenses are $0.33 per cone, and fixed costs total $2,000 per month. A Valentines Day promotion is being planned for the second week of February. During this week, a person buying a cone at the regular price would receive a free cone for a friend. It is estimated that 700 additional cones would be sold and that 900 cones would be given away. Advertising costs for the promotion would be $130.

Required:

Calculate the effect of the promotion on operating income for the second week of February.

Do you think the promotion should occur?