Analyzing Operational Changes Operating results for departme

Analyzing Operational Changes Operating results for department B of Delta Company during 2016 are as follows: Sales Cost of goods sold Gross profit Direct expenses $550,000 378.000 172.000 120,000 Common expenses 66000 Total expenses 36,000 $(14,000) Net loss if department could maintain the same physical volume of product sold while raising selling prices an average of 15% and making an additional advertising expenditure of s60,000, what would be the effect on the department\'s net income or net loss? (ignore income tax in your calculations.) Use a negative sign with your answer to indicate if the effect increases the company\'s net loss If Department B increased its selling price by 15%, the effect on net income (loss) would be s o Check Finish atte ave Answer Previous page ?

Solution

Incremental approach

Increase in sales 550,000*15% =$82,500

Additional advertising expenditure = $60,000

Increase in net income =$22,500

Effect on net income =$22,500