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Managerial Accounting for Kuzio Corp

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Kuzio Corp. produces and sells a single product. Data concerning that product appear below:
Per Unit Percent of sales
Selling price....................$130 100%
Variable expenses................ 78 60%
Contribution margin.............. $52 40%

The company is currently selling 6,000 units per month. Fixed expenses are $263,000 per month. The marketing manager believes that a $5,000 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?

A) Increase of $2,280
B) Increase of $7,280
C) Decrease of $5,000
D) Decrease of $2,280

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Solution Summary

This solution answers a questions involving net operating income in a company.

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