1. Business
  2. Accounting
  3. feather friends inc distributes a highquality wooden birdhouse that sells...

Question: feather friends inc distributes a highquality wooden birdhouse that sells...

Question details

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows:

Sales $ 1,080,000
Variable expenses 540,000
Contribution margin 540,000
Fixed expenses 200,000
Net operating income $ 340,000

6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.50 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $340,000 net operating income as last year? Do not prepare an income statement; use the incremental analysis approach.

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution