Data concerning Pellegren Corporation's single product appear below:
Fixed expenses are $531,000 per month.The company is currently selling 4,000 units per month.The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $35,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 500 units.What should be the overall effect on the company's monthly net operating income of this change?
A) decrease of $18,000
B) increase of $38,000
C) decrease of $38,000
D) increase of $58,000

Question

Data concerning Pellegren Corporation's single product appear below:
 Fixed expenses are $531,000 per month.The company is currently selling 4,000 units per month.The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $35,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 500 units.What should be the overall effect on the company's monthly net operating income of this change?
A) decrease of $18,000 
B) increase of $38,000 
C) decrease of $38,000 
D) increase of $58,000

Quizplus · Accepted Answer

11ea7761_185d_4443_81a5_0193bc080c39_TB2580_00 Net operating income would decrease by $18,000.

Data Concerning Pellegren Corporation's Single Product Appear Below