Vacaro corporation produces and sells a single prodcut . Data concerning appears

Question

Vacaro corporation produces and sells a single prodcut . Data concerning appears below.

                                               Per Unit     Percent of sales

Selling price                              140            100%

Variable expenses                     28              20%

Contribution Margin                  $112           80%

Fiexed expenses are $293,000 per month. The company is currently selling 3000 units per month. Management is considering using a new component that would increase the unit variable cost by $13. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

Please show working !

Explanation / Answer

Net Operating Income will increase = 3400*99( new contribution margin after you increase the variable cost by 13) - 3000*112 = $600

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.