Once again here is Drake Company's income statement for the most recent year:
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Sales (26,000 units)...........................
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$650,000
|
|
Less: Variable expenses..................
|
442,000
|
|
Contribution margin..........................
|
208,000
|
|
Less: Fixed expenses........................
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234,000
|
|
Net operating loss.............................
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$ (26,000)
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Drake’s sales manager is convinced that if the company had made an additional $60,000 expenditure on advertising (fixed cost), the company's sales would have increased by 13,000 units and $325,000. If he is correct, the company's net operating income would have amounted to a total of:
|
1.
|
$44,000
|
|
2.
|
$18,000
|
|
3.
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$239,000
|