Accouting Question 11b

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Data concerning Runnells Corporation’s single and sells a product. Data concerning that product appear below:

Per Unit Percent of Sales
 Selling price $140   100%  
 Variable expenses

70  

50%  
 Contribution margin

$ 70  

50%  

 

The company is currently selling 5,700 units per month. Fixed expenses are $342,500 per month. The marketing manager believes that a $6,700 increase in the monthly advertising budget would result in a 120 unit increase in monthly sales. What should be the overall effect on the company’s monthly net operating income of this change?

 
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