QUESTION 13 1.5 p PotteryWorks Company sold 60,000 units of product for $22 per

Question

QUESTION 13 1.5 p PotteryWorks Company sold 60,000 units of product for $22 per unit. Their unit product cost using process costing is $11 per unit and the company has fixed costs of $240,000 per month. The company predicts that a $2 decrease in the selling price will generate a 20% increase in sales during the next period. If the company lowers the price which of the following will occur in the next period? O a. Net income will increase by $36,000 O b. Net income will decrease by $12,000 O c. Total fixed costs will increase by $48,000. O d. The variable costs per unit will decline by $2 per unit.

Explanation / Answer

a) Net income will increase by $36,000 Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Variable cost per unit = 11 - 240,000/60,000                         7.00 Existing Income = 60000 * (22-11)            660,000.00 Sales = 60000*1.2*20        1,440,000.00 Variable costs = 60000*1.2*7            504,000.00 Fixed costs            240,000.00 Income = 1440,000 - 504000 - 240000            696,000.00 Increase in income = 696000 - 660000              36,000.00

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