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6 October, 03:43

Prince Paper has budgeted the following amounts for its next fiscal year: Total fixed expenses $ 600 comma 000 Selling price per unit $ 70 Variable expenses per unit $ 45 If Price Paper spends an additional $ 12 comma 300 on advertising, sales volume should increase by 3 comma 000 units. What effect will this have on operating income?

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  1. 6 October, 05:23
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    Operating income will increase by $63,000

    Explanation:

    Given:

    Sales volume increase = 3,000 units

    Particular Amount

    Increase in Sales $210,000 ($70*3000)

    Less: Increase in Variable cost $135,000 ($45*3000)

    Less: Increase additional Costs $12,000

    Chane in Net operating Income $63,000

    Operating income will increase by $63,000
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