Laro Corporation produces and sells a single product with the following characteristics:The company is currently selling 5,000 units per month. Fixed expenses are $302,000 per month. Consider each of the following questions independently.
-This question is to be considered independently of all other questions relating to Laro Corporation.Refer to the original data when answering this question. The marketing manager believes that a $7,000 increase in the monthly advertising budget would result in a 110 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 110 units will generate additional contribution margin, which should be calculated and then compared to the $7,000 increase in advertising costs. If the contribution margin from the additional sales exceeds $7,000, the net operating income will increase.

Laro Corporation Produces and Sells a Single Product with the Following