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?

Question

Business

King Mccormick

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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Answers (1)

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Kierra Christian · Answer 1

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