Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 130 100 % Variable expenses 65 50 % Contribution margin $ 65 50 % The company is currently selling 4,900 units per month. Fixed expenses are $208,000 per month. The marketing manager believes that a $6,700 increase in the monthly advertising budget would result in a 170 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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Business

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17 May, 01:45

Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 130 100 % Variable expenses 65 50 % Contribution margin $ 65 50 % The company is currently selling 4,900 units per month. Fixed expenses are $208,000 per month. The marketing manager believes that a $6,700 increase in the monthly advertising budget would result in a 170 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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Bennett Mcpherson · Answer 1

Increase in net operating income: $114,850 - $110,500 = $4,350

Explanation:

Kuzio Corporation

Sales (4,900 units, 5,070units * $130) $637,000 $659,100

Variable expenses ($637,000 $659,100 * 50%) $318,500 $329,550

Contribution margin $318,500 $329,550

Fixed expenses $208,000 $214,700

Net operating income $ 110,500 $114,850

Increase in net operating income: $114,850 - $110,500 = $4,350

The overall effect on the company's monthly net operating income of this change is $4,350