Shelhorse Corporation produces and sells a single product. Data concerning that product appear below:
Per Unit | Percent of Sales | ||||||||||
Selling price | $ | 280 | 100% | ||||||||
Variable expenses | 126 | 45% | |||||||||
Contribution margin | $ | 154 | 55% | ||||||||
Fixed expenses are $354,000 per month. The company is currently selling 4,900 units per month.
Required:
The marketing manager believes that a $23,000 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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