I really apperciate it! Pittsboro Corporation produces and sells a single produc

Question

I really apperciate it!

Pittsboro Corporation produces and sells a single product. Data for that product are Sales price per unit Variable cost per unit Ficed expenses for the month Currently selling $570 S250 $1,250,000 4,000 units Management is discussing increasing the price to $605 to cover an increase in foxed expenses of $83,000. Management believes they might lose 2% of sales per month. What should be the overall effect on the companys monthly operating income if this change is implemented? O A. Increase of $28,600 ? B. Decrease of$83,000 O C. Increase of $83,000 O D. Decrease of $28,600

Explanation / Answer

Hence overall effect=increase in Net operating income=(58600-30000)=$28600.(A).

Current Proposed Unit Sales 4000 units (4000(1-0.02)=3920 units Sales (4000*570)=$2,280,000 (3920*605)=$2,371,600 Variable cost (4000*250)=$1,000,000 (3920*250)=$980,000 Contribution margin $1,280,000 $1,391,600 Fixed expenses $1,250,000 (1,250,000+83000)=$1,333,000 Net operating income $30000 $58600.

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