? hly Cannes / ACC SOS 592018 V week reur $63,600 QUIZ NAVIGATION [s10)?????? ?7

Question

? hly Cannes / ACC SOS 592018 V week reur $63,600 QUIZ NAVIGATION [s10)?????? ?77 Quesion 20 Walsh Corporation produces and sells a single product. Dala corceming that product appear bekow Per UntPercent of Sakes 100 % 40% 60% S 170 Finish atempt Seling prace Vartable expeses Contribution margin 68 S 102 Fxed expenses are $521,000 per month. The company is currenay selling 7.000 unts per month Management is considering using a new component that would increase the unit variable cost by $6. Since the new component wouild increase the features of the company's product, the marketing manager predicts that monthly sales woukd increase by 500 units What should be the overall efflect on the company's monthly net operating income of this change? Select one a increase of $6, 000 b. decrease of $6.000 c. decrease of $48,000 d. increase of $48,000 O Next page Previous page 100% 9:50 AM 4/29/2018

Explanation / Answer

Answer:a. Increase of $6000

Increase in Units sold = 500 ; Total = 7500 units

New Variable cost = 68 + 6 = 74

Contribution = 170 - 74 = 96 per unit

Total contribution = 7500 x 96 = 720000

Net Income = 720000 - 521000 = 199000

Old Profit = (7000 x 102 ) - 521000 = 193000

Increase = 199000 - 193000 = $6000

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