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What would be the net increase or decrease in income

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Reference no: EM131761093

Arkansas Co. has total fixed costs of $12,793 and a contribution margin ratio of 37%. Assume that an additional advertising expenditure of $3,662 would increase sales by $8,655. The company wants to know if they should spend this additional amount on advertising. What would be the net increase or decrease in income if they make the additional expenditure?

The correct answer is -460

Formulas

increase in sale x contribution margin ratio = increase in contribution margin

increase in contribution margin - increase in advertising costs = increase in income

Reference no: EM131761093

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