Pittsboro Corporation produces and sells a single product. Data for that product

Question

Pittsboro Corporation produces and sells a single product. Data for that product are Sales price per unit Variable cost per unit Fixed expenses for the month Currently selling $570 $180 $1,050,000 6,500 units Management is discussing increasing the price to $595 to cover an increase in fixed expenses of $83,000. Management believes they might lose 2% of sales per month What should be the overall effect on the company's monthly operating income if this change is implemented? 0 A. Increase of $83,000 O B. Decrease of $83,000 O C. Increase of $25,550 O D. Decrease of $25,550

Explanation / Answer

Hence increase=(1510550-1485000)=$25550.

Current Proposed Sales (6500*570)=$3705000 (6500*0.98)*595=$3790150 Less:VC (180*6500)=$1170,000 (180*(6500*0.98))=$1146600 Contribution margin $2535000 $2643550 Less:FC $1050000 (1050000+83000)=$1133000 Net operating income 1485000 $1510550

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---