A company typically earns a contribution margin ratio of

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A company typically earns a contribution margin ratio of 25%and has current fixed costs of $80,000. The general manageris considering spending an additional $20,000 to do one of thefollowing:
1. Start a new ad campaignthat's expected to increase salesrevenue by 5%.
2. License a new computerized ordering system that is expectedto increase the comtribution margin ratio by 30%.
Sales revenue for the coming year was initially forecast toequal $1,200,000(without implementing either option)
Question: For each option, how much will projected operatingincome increase or decrease relative to initial predictions?

Reference no: EM13611672

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