g Dybala Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 110 100 % Variable expenses 66 60 % Contribution margin 44 40 % The company is currently selling 5,120 units per month. Fixed expenses are $210,000 per month. The marketing manager believes that a $6,600 increase in the monthly advertising budget would result in a 230 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change

Question

Business

Giselle Knight

13 January, 11:38

g Dybala Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 110 100 % Variable expenses 66 60 % Contribution margin 44 40 % The company is currently selling 5,120 units per month. Fixed expenses are $210,000 per month. The marketing manager believes that a $6,600 increase in the monthly advertising budget would result in a 230 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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Kash Maldonado · Answer 1

Effect on income = $3,520 increase

Explanation:

Giving the following information:

Contribution margin = 44

The marketing manager believes that a $6,600 increase in the monthly advertising budget would result in a 230 unit increase in monthly sales.

To calculate the effect on income, we need to use the following formula:

Effect on income = increase in contribution margin - increase in costs

Effect on income = 230*44 - 6,600

Effect on income = $3,520 increase