Rudy Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of SalesSelling price $150 100% Variable costs 60 40% Contribution margin $90 60% Fixed costs are $355,000 per month. The company is currently selling 5,000 units per month.Required:The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 160-unit increase in monthly sales. What should be the overall effect on the company's monthly operating profit of this change?
What will be an ideal response?
| Increase in total contribution margin ($90 per unit × 160 units) | $ | 14,400 |
| Less incremental fixed costs | 12,000 | |
| Change in operating profit | $ | 2,400 |
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