Reference no: EM132581107

A company makes a product that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:

Sales$1,120,000

Variable expenses 560,000

Contribution margin 560,000

Fixed expenses 180,000

Net operating income$380,000

Question 1: The company president wants to add new features to the product, which will increase the variable expenses by $2.10 per unit. She thinks that the new features, combined with some increase in marketing spending, would increase this year's sales by 25%. How much could the president increase this year's fixed marketing expense and still earn the same $380,000 net operating income as last year?