Answer (B) is correct . The $60,000 advertising campaign will increase direct fixed costs by $5,000 per month ($60,000 ¡Â 12). Sales and contribution margin will also increase 12000 and 3600.3600-5000=-1400.
Answer (A) is incorrect because This amount is the monthly advertising cost.
Answer (C) is incorrect because The contribution margin of the Suburban Store will increase by $3,600, which is $1,400 less than the increased advertising cost.
Answer (D) is incorrect because This amount omits the 10% increase in variable costs from the calculation.
Answer (C) is incorrect because The contribution margin of the Suburban Store will increase by $3,600, which is $1,400 less than the increased advertising cost.
Answer (D) is incorrect because This amount omits the 10% increase in variable costs from the calculation.
Korbin is considering a promotional campaign at the Suburban Store that would not affect the Urban Store. Increasing annual promotional expense at the Suburban Store by $60,000 in order to increase this store’s sales by 10% would result in a monthly increase (decrease) in Korbin’s operating income during the year (rounded) of