Reference no: EM131785088

Question - Due to erratic sales of its sole producta high-capacity battery for laptop computersPEM, Inc., has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below:

Sales (19,500 units at $30 per unit) $585,000

Variable expenses 409,500

Contribution margin 175,500

Fixed expenses 180,000

Net operating loss $(4,500)

The president believes that a $16,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the president is right, by how much will the company's net operating income increase or decrease? (Use the incremental approach in preparing your answer.)