How much will a company's net operating income change if it undertakes an advertising campaign given the following data:

A) $200 increase
B) $25,200 increase
C) $15,000 increase
D) $9,800 increase

Question

How much will a company's net operating income change if it undertakes an advertising campaign given the following data:  A) $200 increaseB) $25,200 increaseC) $15,000 increaseD) $9,800 increase

Maxime Evers · Accepted Answer

Final Answer : D, Explanation :  CM ratio = 1 - Variable expense ratio = 1 - 0.42 = 0.58Increase in net operating income = CM ratio × Increase in sales - Increase in fixed expenses= (0.58 × $60,000)- $25,000 = $34,800 - $25,000 = $9,800

How much will a company's net operating income change if it undertakes an advertising campaign given the following data:

A) $200 increase
B) $25,200 increase
C) $15,000 increase
D) $9,800 increase

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