The company is currently selling 5,000 units per month. fixed expenses are $243,000 per month. the marketing manager believes that an $11,000 increase in the monthly advertising budget would result in a 180 unit increase in monthly sales. what should be the overall effect on the company's monthly net operating income of this change?

per unit price percent of sales

selling prices $150 100%

variable exp 90 60%

cont margin 60 40%

(a) increase of $200

(b) decrease of $200

(c) increase of $10,800

(d) decrease of $11,000

(B) decrease of $200

Explanation:

As for the information provided,

Current net income = Contribution - Fixed cost

Contribution = $60 5,000 = $300,000

Fixed cost = $243,000

Thus, net income = $57,000 = $300,000 - $243,000

Now after the revised advertisement plan

Fixed cost = $243,000 + $11,000 = $254,000

Then contribution = $60 5,180 = $310,800

Net income = $310,800 - $254,000 = $56,800

The difference in old and new income = $57,000 - $56,800 = $200 decrease.

Therefore, correct option is:

Option B

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