A company has provided the following cost, price, and sales data: Selling price Variable expenses Per Unit $ Contribution margin $ 222 45 177 The company is currently selling 6,200 units per month. Fixed expenses are $898,000 per month. The marketing manager would like to cut the selling price by $19 and increase advertising spending by $33,000 per month. The marketing manager predicts that these changes would increase monthly sales quantity by 18%. What would be the overall effect on the company's monthly net operating income of this change? (Note: A POSITIVE number indicates an INCREASE in net operating income, and a NEGATIVE number indicates a DECREASE in net operating income)
A company has provided the following cost, price, and sales data: Selling price Variable expenses Per Unit $ Contribution margin $ 222 45 177 The company is currently selling 6,200 units per month. Fixed expenses are $898,000 per month. The marketing manager would like to cut the selling price by $19 and increase advertising spending by $33,000 per month. The marketing manager predicts that these changes would increase monthly sales quantity by 18%. What would be the overall effect on the company's monthly net operating income of this change? (Note: A POSITIVE number indicates an INCREASE in net operating income, and a NEGATIVE number indicates a DECREASE in net operating income)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A company has provided the following cost, price, and sales
data:
Selling price
Variable expenses
Per Unit
$
Contribution margin $
222
45
177
The company is currently selling 6,200 units per month. Fixed
expenses are $898,000 per month.
The marketing manager would like to cut the selling price by
$19 and increase advertising spending by $33,000 per month.
The marketing manager predicts that these changes would
increase monthly sales quantity by 18%. What would be the
overall effect on the company's monthly net operating income
of this change?
(Note: A POSITIVE number indicates an INCREASE in net
operating income, and a NEGATIVE number indicates a
DECREASE in net operating income)
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