(Solved):The following information was extracted from the accounting records of MVA Corporation. MVA sold…

 

Question

The following information was extracted from the accounting records of MVA Corporation. MVA sold 20,000 items during the accounting period.

Total Sales revenue $1,200,000
Total variable costs $400,000
Total fixed costs $480,000

If MVA pays $100,000 for advertising, and sales volume increases by 10%, by how much will net income change?

a. decrease of $68,000

b. decrease by $20,000

c. increase by $120,000

d. increase by $20,000

e. no change to net income

 

EXPERT ANSWER

  • Answer: b.
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