(Answered): Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Perce…

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).
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