Answer:
A. $1,675
B. No
Explanation:
a. Calculation for increase or decrease in net operating income
Increase in monthly sales $17,500
× Contribution margin ratio 39%
Increase in Contribution margin $6,825
(17,500×39%)
Less: Advertising costs $8,500
Net Operating income decreases by $1,675
($6,825- $8,500)
b. Based on the above Calculation the advertising should NOT be increased.
A. Net Operating income decreased by $1,675 and B. No
Net operating income refers to capital structure. The capital structure of an organization depends on the mix or ratio of debt and equity in the mode of their financing. betting on what companies prefer, some may have more debt or more equity in financing their asset, but the final goal is to maximize their market price and their profits.
(a) Calculation for increase or decrease in net operating income
After that, an increase in monthly sales $17,500 × Contribution margin ratio 39%
Then, Increase in Contribution margin $6,825
(17,500×39%)
Then, Less: Advertising costs $8,500
Now, Net Operating income decreased by $1,675
($6,825- $8,500)
(b) It is Based on the above Calculation that is advertising but they should NOT be increased.
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