Reference no: EM132597397

Question - A company makes a product that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $200,000 per year. Its operating results for last year were as follows:

Sales $2,880,000

Variable expenses 1,440,000

Contribution margin 1,440,000

Fixed expenses 200,000

Net operating income $1,240,000

The company president wants to add new features to the product, which will increase the variable expenses by $1.60 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 $1,240,000 net operating income as last year?