All else being equal, an increase in advertising expenditures will ________.
A) reduce operating income
B) reduce contribution margin
C) increase variable costs
D) increase selling price

Question

Quizplus · Accepted Answer

An increase in advertising expenditures is considered a fixed cost, not directly tied to the production or sale of individual units. Therefore, it would reduce operating income as it is an additional expense that does not affect the variable costs or the contribution margin per unit. It also does not directly impact the selling price of the product.

All Else Being Equal, an Increase in Advertising Expenditures Will