Craylon Manufacturing produces a single product that sells for $100.Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units.In an attempt to improve performance,management is considering a number of alternative actions.Each situation is to be evaluated separately.What is the effect on operating income with the increase of advertising expenses?
A) Operating income will decrease by $10,000.
B) Operating income will increase by $11,000.
C) Operating income will decrease by $18,000.
D) Operating income will increase by $17,000.

Question

Quizplus · Accepted Answer

Increasing advertising expenses will increase total fixed costs, which will decrease operating income by the amount of the increase in advertising expenses.

Craylon Manufacturing Produces a Single Product That Sells for $100