The sales manager is convinced that a 10% reduction in the selling price, combined with a $30,000 increase in advertising, would increase this year's unit sales by 25%. If the sales manager's ideas are implemented, how much will net operating income increase or decrease over last year? (Negative amounts should be input with a minus sign.)

Explanation:

Assumed Data    

Budgeted Sales  1000000

units sold           10000

Unit price           100

Cost Per unit           60

                     Before            After               Cahnge Due to

                      impelemtation    implementation           implementation

Sales           1000000        1125000*                      125000

Cost           -600000        -750000                      -150000

Profit           400000         375000                      -25000

Advertise Cost      0                  -30000                      -30000

                  400000          345000                      -55000

*Sales price                100

Reduction                  10%

After Reduction Sp  90

Current unit sales  10000

Increase                    25%

After increase  12500

Cost Per unit will remain the same because only sales price will be decreased to boost the sale  

New sales12500*901125000

Cost         12500*60750000

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