Data concerning Homme Corporation's single product appear below:The company is currently selling 2,000 units per month. Fixed expenses are $130,000 per month. Consider each of the following questions independently.
-This question is to be considered independently of all other questions relating to Homme Corporation.Refer to the original data when answering this question. The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales.What should be the overall effect on the company's monthly net operating income of this change?

Question

Quizplus · Accepted Answer

The increase in sales by 190 units would generate additional revenue. If the contribution margin per unit is greater than the increase in advertising costs, the net operating income will increase. The calculation involves multiplying the contribution margin per unit by the increase in units sold and then subtracting the increase in advertising costs.

Data Concerning Homme Corporation's Single Product Appear Below:The Company Is