Hoppy Cat Toy Company has estimated the following amounts for its next fiscal year:

If the company spends an additional $34,000 on advertising,sales volume would increase by 2,900 units.What effect will this decision have on the operating income?

Question

Hoppy Cat Toy Company has estimated the following amounts for its next fiscal year:

If the company spends an additional $34,000 on advertising,sales volume would increase by 2,900 units.What effect will this decision have on the operating income?

Quizplus · Accepted Answer

B)Increase in total contribution margin = 2,900 units × ($40 - $25)
= 2,900 units × $15 = $43,500
Increase in operating income = $43,500 - $34,000 (Advertising costs)= $9,500

Hoppy Cat Toy Company Has Estimated the Following Amounts for Its