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The marketing manager would like to cut the selling price

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Data concerning Homme Corporation's single product appear below:
                                                           Per unit                                           Percent of sales
Selling price                                        $350                                                    100%

variable expenses                                210                                                     60%

contribution margin                              $140                                                    40%

The company is currently selling 3,600 units per month. Fixed expenses are $146,000 per month.

The marketing manager would like to cut the selling price by $20 and increase the advertising budget by $16,000 per month. The marketing manager predicts that two changes will increase monthly sales by 700 units. What should be the overall effect on the company's monthly net operating income of this change?

Reference no: EM13581371

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