| Selling price |
$ |
115 |
|
100% |
| Variable expenses |
|
69 |
|
60% |
| |
| Contribution margin |
$ |
46 |
|
40% |
| |
Fixed expenses are $83,000 per month and the company is selling 2,500 units per month.
Required:
1-a. The marketing manager believes that an $8,800 increase in the monthly advertising budget would increase monthly sales by $19,000. Calculate the increase or decrease in net operating income.
Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $5 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Calculate the change in total contribution margin.