How Much Will My Company’s Net Operating Income change if it undertakes an advertising campaign?

Posted Sunday, December 6, 2009 by admin


I think this is the info you need to know to find out. I’m not sure how to do that.

Cost of advertising Campaign: $25,000
Variable Expense as a percentage of sales: 42%
Increase in Sales: $60,000

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Posted in Other - Business & Finance

1 Comment on "How Much Will My Company’s Net Operating Income change if it undertakes an advertising campaign?"

  • EJMA (Philippines) said on Dec 6th, 2009 at 4:14 AM:

    The reason why you’re conducting an advertising campaign is of course to increase your sales. Therefore, in order to turn – up your plan, your increase in sales must exceed the cost attributable to it.

    Here’s the solution:

    Increase in Sales $60000
    Less: Variable Cost ($60000 x 42%) 25200
    Less: Fixed Cost (Advertising) 25000
    Increase in profit $9800

    Comment:

    You should conduct an advertising campaign because it will generate an income increase of $9800.

    For any accounting question, e-mail me at

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