Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable...
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Accounting
Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows:
| Sales | $ | 3,120,000 |
| Variable expenses | 1,560,000 | |
| Contribution margin | 1,560,000 | |
| Fixed expenses | 160,000 | |
| Net operating income | $ | 1,400,000 |
6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.30 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 $1,400,000 net operating income as last year?
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