Hobby Cat Toy Company has estimated the following amounts for its next fiscal year: If the company spends an additional $34,000 on advertising, sales volume would increase by 2,900 units. What effect will this decision have on the operating income?

Total fixed expenses $833,500

Sales price per unit 40

Variable expenses per unit 25

a) Operating income will decrease by $72,500 (B) Operaing income will increase by 9,500 (C) Operating income will increase by 116,000 (D) Operating income will increase by $43,500

Question

Business

Dalia Graves

25 August, 14:34

Hobby Cat Toy Company has estimated the following amounts for its next fiscal year: If the company spends an additional $34,000 on advertising, sales volume would increase by 2,900 units. What effect will this decision have on the operating income?

Total fixed expenses $833,500

Sales price per unit 40

Variable expenses per unit 25

a) Operating income will decrease by $72,500 (B) Operaing income will increase by 9,500 (C) Operating income will increase by 116,000 (D) Operating income will increase by $43,500

+1

Answers (1)

Know the Answer?

Emmanuel Rowe · Answer 1

The correct answer is B.

Explanation:

Giving the following information:

If the company spends an additional $34,000 on advertising, sales volume would increase by 2,900 units.

Total fixed expenses $833,500

Sales price per unit 40

Variable expenses per unit 25

Effect in income = (40-25) * 2,900 - 34,000 = $9,500