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Due to erratic sales of its sole product?a high-ca...

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Question

Due to erratic sales of its sole product?a high-capacity battery for laptop computers?PEM, Inc., has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (19,500 units at $30 per unit) $585,000 Variable expenses 409,500 Contribution margin 175,500 Fixed expenses 180,000 Net operating loss $(4,500) The president believes that a $16,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the president is right, by how much will the company's net operating income increase or decrease? (Use the incremental approach in preparing your answer.)

 

Paper#3319 | Written in 18-Jul-2015

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