Memofax Inc. produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below. Sales (12,600 units at $40 per unit $504,000 Variable expenses Contribution margin Fixed expenses 302,400 201,600 Net operating loss 225,600 $(24,000) The sales manager feels that a $7,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $73,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Memofax Inc. produces memory enhancement kits for fax machines. Sales have been very
erratic, with some months showing a profit and some months showing a loss. The
company's contribution format income statement for the most recent month is given
below.
Sales (12,600 units at $40 per unit $504,000
Variable expenses
Contribution margin
Fixed expenses
302,400
201,600
Net operating loss
225,600
$(24,000)
The sales manager feels that a $7,700 increase in the monthly advertising budget,
combined with an intensified effort by the sales staff, will result in a $73,000 increase in
monthly sales. If the sales manager is right, what will the revised net operating income or
loss?
Transcribed Image Text:Memofax Inc. produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below. Sales (12,600 units at $40 per unit $504,000 Variable expenses Contribution margin Fixed expenses 302,400 201,600 Net operating loss 225,600 $(24,000) The sales manager feels that a $7,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $73,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss?
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