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Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable...

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Accounting

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows:

Sales: 2,080,000

Variable expense: 1,040,000

Contribution margin: 1,040,000

Fixed expense: 160,000

Net operating income: 880,000

6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.80 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 $880,000 net operating income as last year?

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