Saloli, Inc., provides the following information:



1) If Saloli increases its unit selling price by 5%, with no changes in variable costs and sales volume, its

new operating income will be ________.

2) If Saloli decreases its variable costs by $2 per unit, with no change in selling price per unit and sales

volume, its new operating income will be ________.


1. Unit selling price = Sales/Number of units = $30,000/500 = $60
Increasing by 5% = $60 × 1.05 = $63
Sales with new price= $63 × 500 = $31,500
Operating income = $31,500-$18,000-$6,000 = $7,500
2. Variable cost per unit = $18,000/500 = $36
Decrease by $2 = $36 - $2 = $34
New variable costs = $34 × 500 = $17,000
Operating income = $30,000 - $17,000 -$6,000 = $7,000

Business

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