Riven Corporation has a single product whose selling price is $14. At an expecte

Question

Riven Corporation has a single product whose selling price is $14. At an expected sales level of $1,470,000, the company's variable expenses are $630,000 and its fixed expenses are $285,000. The marketing manager has recommended that the selling price be increased by 30%, with an expected decrease of only 10% in unit sales. What would be the company's net operating income if the marketing manager's recommendation is adopted? $1,434,900 $867,900 $555,000 $804,900 $1,434,900 $867,900 $555,000 $804,900 Riven Corporation has a single product whose selling price is $14. At an expected sales level of $1,470,000, the company's variable expenses are $630,000 and its fixed expenses are $285,000. The marketing manager has recommended that the selling price be increased by 30%, with an expected decrease of only 10% in unit sales. What would be the company's net operating income if the marketing manager's recommendation is adopted?

Explanation / Answer

Hi,

Please find the answer as follows:

Net Operating Income = (105000 - 10%*105000)*(14 + 14*30%) - 630000 - 285000 = 804900

Thanks.

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