A company produces 1,000 packages of chicken feed per month
The sales price is $6 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,600 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will increase from $1.50 to $2.50 per unit, but there will be no change in fixed costs. The company will price the new product at $4.50 to compete with other products. How will this affect operating income?
A) Operating income will decrease by $2,500 per month.
B) Operating income will increase by $2,500 per month.
C) Operating income will decrease by $1,600 per month.
D) Operating income will remain unchanged.
A .A)
Further
Sell as is processing
Sales revenue $6,000 $4,500
Less: Variable cost 1,500 2,500
Less: Fixed cost 1,600 1,600
Operating income $2,900 $400
Decline in operating income $2,500
You might also like to view...
The landlord records the security deposit she collects from the tenant as a(n)
a. asset b. liability c. contingent liability d. contra liability
The talent agency that is trying to convince Berry College to hire a motivational speaker for the college's homecoming festivities is marketing people
Indicate whether the statement is true or false
On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On March 15, Babson returns some of the merchandise. The selling price of the merchandise is $600 and the cost of the merchandise returned is $350. Babson pays the invoice on March 20, and takes the appropriate discount. The amount that Klein receives from Babson on March 20 is:
A. $7,044. B. $7,644. C. $7,800. D. $7,056. E. $7,200.
What is an unassembled exam?
What will be an ideal response?