Question

kurio Corporation produces and sets a single product. Data concerning that product appear below Per Unit $140 Percent of Sales 100% Selling price Variable expenses Contribution margin SON The company is currently seling 5.300 units per month Fired expenses are $200.000 per month The marketing manager beteves that a $7400 Increase in the monthly advertising budget would retut In a 170 unit increase in monthly sales. What should be the overal effect on the company's mothy net operating income of is change Multiple Choice 0 cresce of $4.500 0 increase of Syl.900 0 decres 7400 C) 54500

Answer 1

Ans.	Option 1st   Increase of $4,500
	*Increase in sales units will increase the contribution margin and difference between incremental contribution
	margin and increamental fixed cost will equal to the increase of decrease in net operating income.
	Increamental contribution margin ($70 * 170)	$11,900
	Less: Increase in fixed cost	-$7,400
	Increase in net operating income	$4,500
	*Increamental contribution margin = Contribution margin per unit * Increase in sales volume