For each option how much will projected operating income

Reference no: EM13481542

A company typically earns a contribution margin ratio of 25%and has current fixed costs of $80,000. The general manager is considering spending an additional $20,000 to do one of the following:

1. Start a new ad campaign that's expected to increase sales revenue 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 to equal $1,200,000(without implementing either option)

Question: For each option, how much will projected operating income increase or decrease relative to initial predictions?

Reference no: EM13481542

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