Margin Ratio and Net Income
Not what you're looking for?
A company's manager estimates that in the upcoming year, decreasing advertising costs by $35,000 will cause sales revenue to decrease by $80,000. if the company's contribution margin ratio is 40% what will be the overall effect on net income?
a) Net income will increase by $3,000
b) Net income will decrease by $3,000
c) Net income will increase by $18,000
d) Net income will decrease by $18,000.
Purchase this Solution
Solution Summary
This solution provides the correct answer with explanation and calculations to the net income question listed. Includes 2 references.
Solution Preview
80,000 x .40 = 32,000
35,000 - 32,000 = 3,000
a) Net income will increase by $3,000
In this case, total sales revenue decrease = 80,000 and the CM is .40. We therefore have ...
Purchase this Solution
Free BrainMass Quizzes
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.