Question

ystem anticipates that spending $300,000 on an advertising campaign will increase bed days by 650. The marketing department anticipates that each additional bed day will yield $2,100 in additional revenue and will increase costs by $1,700. The campaign Group of answer choices will reduce profits by $40,000. will increase profits by $40,000. will increase profits by $90,000. will increase profits by $210,000.

Answer 1

Effect on income= -$40,000

Step-by-step explanation:

First, we need to calculate the unitary contribution margin:

Unitary contribution margin= 2,100 - 1,700= $400

To calculate the effect on income, we need to use the following formula:

Effect on income= total contribution margin - increase in fixed costs

Effect on income= 650*400 - 300,000

Effect on income= -$40,000