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1 August, 05:34

Assume the company is considering a reduction in the selling price by $10 per unit and an increase in advertising budget by $5,000. This will increase sales volume by 50%. What is the net operating income after the changes?

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  1. 1 August, 08:59
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    New selling price = $110 - $10

    = $100

    New sales level = 1,000 units x 150%

    = 1,500 units

    Net operating income = 1,500 units * Selling price of $100 per unit - 1,500 units * variable expense of $60 per unit - $30,000 + $5,000

    = $25,000

    Therefore, the net operating income after the changes is $25,000.
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