Purchase Solution

Margin Ratio and Net Income

Not what you're looking for?

Ask Custom Question

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.