Question
Socrates Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Socrates Corporation produces and sells a single product. Data concerning that product appear below:
| Per Unit | Percent of Sales | ||||||||||
| Selling price | $ | 140 | 100 | % | |||||||
| Variable expenses | 56 | 40 | % | ||||||||
| Contribution margin | $ | 84 | 60 | % | |||||||
The company is currently selling 6,000 units per month. Fixed expenses are $202,000 per month. The marketing manager believes that a $7,200 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?
Multiple Choice
-
increase of $4,560
-
decrease of $7,200
-
decrease of $4,560
-
increase of $11,760
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