Question 5A:

The sales manager is convinced that a 10% reduction in the selling price, combined with a $79,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager is right, what would be this year's net operating income if his ideas are implemented? (Do not round intermediate calculations.)

Net Operating Income (loss)?

Question 5B:

The sales manager is convinced that a 10% reduction in the selling price, combined with a $79,000 increase in advertising, would increase this year's unit sales by 25%. Do you recommend implementing the sales manager's suggestions?

Yes or No?

Question 6:

The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.00 per unit. He thinks that this move, combined with some increase in advertising, would increase this year's sales by 25%. How much could the president increase this year's advertising expense and still earn the same $1,380,000 net operating income as last year?

The amount by which advertising can be increased is?

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income 3,120,000 1,560,000 1,560,000 180,000 $ 1,380,000