Question
Laro Corporation produces and sells a single product with the following characteristics:
a. Increase of $1,000 b. Decrease of $1,000 c. Increase of $34,000 d. Decrease of $34,000 Laro Corporation produces and sells a single product with the following characteristics: The company is currently selling 5,000 units per month. Fixed expenses are $302,000 per month. Consider each of the following questions independently. This question is to be considered independently of all other questions relating to Laro Corporation. Refer to the original data when answering this question. Management is considering using a new component that would increase the unit variable cost by $7. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change?
Explanation / Answer
Current operating income 5,000 *75 -302,000= 73,000 Projected 5,500 *68 -302,000= 72,000 Decrease of 1,000 b)
