Dunbar Manufacturing’s variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $33,000. If sales are expected to increase $60,000, by how much will the company's net income increase?
1. $27,000
2. $42,000
3. $18,000
4. $9,000
1. $27,000
2. $42,000
3. $18,000
4. $9,000
-
18,000
60K increase in revenue, less 33K cost of campaign
= 27K
Less variable cost 30% of 27K = 9K
27K - 9K variable cost = 18K
60K increase in revenue, less 33K cost of campaign
= 27K
Less variable cost 30% of 27K = 9K
27K - 9K variable cost = 18K