Asked by Kayli Swigart on May 02, 2024
Verified
How much will a company's net operating income change if it undertakes an advertising campaign given the following data:
A) $200 increase
B) $25,200 increase
C) $15,000 increase
D) $9,800 increase
Advertising Campaign
A series of advertisement messages in various media that share a single idea and theme intended to achieve marketing objectives.
Net Operating Income
A measure of a company's profitability, calculated as the gross revenue minus operating expenses, excluding taxes and interest.
- Ascertain the net operating income by examining fluctuating amounts of sales, financial outlays, and adjustments in sales strategies.
Verified Answer
ME
Maxime EversMay 03, 2024
Final Answer :
D
Explanation :
CM ratio = 1 - Variable expense ratio = 1 - 0.42 = 0.58
Increase in net operating income = CM ratio × Increase in sales - Increase in fixed expenses
= (0.58 × $60,000)- $25,000 = $34,800 - $25,000 = $9,800
Increase in net operating income = CM ratio × Increase in sales - Increase in fixed expenses
= (0.58 × $60,000)- $25,000 = $34,800 - $25,000 = $9,800
Learning Objectives
- Ascertain the net operating income by examining fluctuating amounts of sales, financial outlays, and adjustments in sales strategies.
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