Dybala corporation produces and sells a single product. data concerning that product appear below: the company is currently selling 5,000 units per month. fixed expenses are $173,000 per month. the marketing manager believes that an $6,000 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

Nina

1 June, 14:48

Dybala corporation produces and sells a single product. data concerning that product appear below: the company is currently selling 5,000 units per month. fixed expenses are $173,000 per month. the marketing manager believes that an $6,000 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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Malia · Answer 1

The given problem lacks the data about the price of the single product. However assuming that the selling price is similarly $44 which I got from other references, then we can now calculate for the net change of the monthly operating income.

So to solve for the change, we use the formula:

Change in net operating income = Increase in units * Selling price - Increase in advertising budget

Change in net operating income = 170 * $44 - $6,000

Change in net operating income = $1,480

Since the change is positive, then it is a good decision to increase the monthly advertising budget by $6,000.