Houpe Corporation produces and sells a single product. Data concerning that product appear below:
Per Unit Percent of Sales
Selling price....................... $140 100%
Variable expenses.............. 42 30%
Contribution margin.......... $ 98 70%
Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. Consider each of the following questions independently.
127. This question is to be considered independently of all other questions relating to Houpe Corporation. Refer to the original data when answering this question. The marketing manager believes that a $14,000 increase in the monthly advertising budget would result in a 150 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?
A) increase of $700
B) increase of $14,700
C) decrease of $14,000
D) decrease of $700
128. This question is to be considered independently of all other questions relating to Houpe Corporation. Refer to the original data when answering this question. Management is considering using a new component that would increase the unit variable cost by $5. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 300 units. What should be the overall effect on the company's monthly net operating income of this change?
A) decrease of $2,100
B) decrease of $27,900
C) increase of $2,100
D) increase of $27,900
129. This question is to be considered independently of all other questions relating to Houpe Corporation. Refer to the original data when answering this question. The marketing manager would like to cut the selling price by $7 and increase the advertising budget by $28,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should be the overall effect on the company's monthly net operating income of this change?
A) decrease of $17,500
B) increase of $17,500
C) decrease of $24,500
