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Question(s) / Instruction(s):

A company has the following preliminary budget assuming no advertising expenditures:

Selling price                        $10 per unit

Unit sales                            100,000

Variable expenses           $600,000

Fixed expenses                                $300,000

Based on a market study, the company estimated that it could increase the unit selling price by 15% and increase the unit sales volume by 10% if $100,000 were spent on advertising. Assuming that these changes are incorporated in its budget, what should be the budgeted net operating income?

 a)           $175,000

 b)           $190,000

 c)           $205,000

 d)           $365,000

 

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