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Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 150 100 % Variable expenses 75 50 % Contribution margin $ 75 50 % The company is currently selling 5,800 units per month. Fixed expenses are $201,000 per month. The marketing manager believes that a $7,900 increase in the monthly advertising budget would result in a 100 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 $7,500
increase of $-400
decrease of $7,900
decrease of $-400
Expert Answer
| Particulars | Amount($) |
| Increase in sales(100*$150) | $15000 |
| Less:Increase in variable costs($75*100) | $7500 |
| Increase in Contribution margin | $7500 |
| Less:increase in advertising budgets | $7900 |
| Overall effect | $400(Decrease )(D). |
