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Shelhorse Corporation produces and sells a single product. Data concerning that product appear below:

Per Unit Percent of Sales
Selling price $220 100%
Variable expenses 66 30%
Contribution margin $154 70%

Fixed expenses are $362,000 per month. The company is currently selling 5,700 units per month.

Required:
The marketing manager believes that a $19,000 increase in the monthly advertising budget would result in a 130 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Respuesta :

Cricetus

Answer:

The change in the net operating income will be "$1,020".

Explanation:

According to the question, the values will be:

Sales,

  • After: 1282600
  • Before: 1254000

Variable expenses,

  • After: 384780
  • Before: 376200

Contribution margin,

  • After: 897820
  • Before: 877800

Fixed expenses:

  • After: 381000
  • Before: 362000

The net income will be:

  • Before: $516,820
  • After: $515,800

hence,

The change in the net operating income will be:

= [tex]After \ net \ operating \ income - Before \ net \ operating \ income[/tex]

= [tex]516820- 515800[/tex]

= [tex]1,020[/tex] ($)

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