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Ch 5: E 5,6,7
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Exercise 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO5-4]
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Section BreakExercise 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO5-4]
1.
value:
2.00 points
Required information
Exercise 5-5 Part 1
1-a.
The marketing manager argues that a $9,300 increase in the monthly advertising budget would increase monthly sales by $21,500. Calculate the increase or decrease in net operating income.
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Hint #1
2.
value:
2.00 points
Required information
Exercise 5-5 Part 2
2-a.
Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $6 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin.
Ch 5: E 5,6,7
instructions | helpExplanation / Answer
1- sales = 420000
- variable cost 273000
contribution = 147000
- fixed cost = 88000
net income = 59000
change in sales due to advertising budget
sales ====== 441500
- variable cost = 286975
contribution = 154525
-fixed cost = 88000
net income = 57225
there is decrease in income due to increased advertising budget = 59000- 57225 = 2725
2- if new quipment is employed
sales = 504000
v.cost = 349200
contribution = 154800
- fixed cost = 88000
net income = 66800
net income will increase = 66800 - 59000 = 7800