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The company is currently selling 8,000 units per month. Fixed expenses are $719,000 per month. The marketing manager believes that a $20,000 increase in the monthly advertising budget would result in a 180 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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tanseershar

Answer:

The following data is missing in the question which is being reproduced;

Selling price        $140

Variable Cost       $28

Contribution Margin $112

Explanation:

Increase in sale 180*140   $25,200

Variable Cost 180*28        ($5,040)

Net contribution margin     $20,160

Advertising expense-incremental  ($20,000)

Net Increase in operating income    $160

The net operating income will increase with just $160 because of this change.

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