Answer:
Income will increase in $72,200
Explanation:
Giving the following information:
Comission= $10 per unit
The decrease in fixed cost= $110,000
Increase in sales= 520 units
First, we need to determine the actual net operating income:
Sales= 160*9,500= 1,520,000
Variable cost= 40*9,500= (380,000)
Contribution margin= 1,140,000
Fixed costs= (1,036,000)
Net operating income= $104,000
Now, we can calculate the effect on income:
Contribution margin= (9,500 + 520)*120= 1,202,400
Fixed costs= (1,036,000 - 110,000)= (926,000)
Variable marketing cost= (10,020*10)= (100,200)
Net operating income= 176,200
Income will increase in (176,200 - 104,00)= $72,200
