Assuming there is no change in a product's price or the quantity demanded, if a business owner wants to increase her advertising expenses by $500 monthly, this would cause total costs to and the break-even quantity to multiple choice
a. increase; increase.
b. decrease; increase.
c. decrease; stay the same.
d. stay the same; increase.
e. stay the same; decrease.

a. increase; increase.

Explanation:

Their total cost will increase by 500

total cost = manufacturing cost + selling and administrative cost

the total cost of selling and administrative will increase by 500

so total cost also increase by the same amount.

Because the cost are higher, the break-even point will also increase

As the fixed cost increased by 500 the company needs to increase their sales to achieve break even

break even = fixed cost / contribution

after the new advertizing cost

break even = (fixed cost + 500) / contribution

The cost increase, so the quotient also increase.

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