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Sales $ 1 , 1 2 0 , 0 0 0 Variable expenses 5 6 0 , 0 0 0 Contribution margin 5 6 0

Sales $ 1,120,000
Variable expenses 560,000
Contribution margin 560,000
Fixed expenses 160,000
Net operating income $ 400,000
The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.50 per unit. He thinks this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could the president increase this year's advertising expense and still earn the same $400,000 net operating income as last year?

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