Wrobbel Corporation produces and sells a single product Data concerning that pro

Question

Wrobbel Corporation produces and sells a single product Data concerning that product appear below Fixed expenses are $130,000 per month The company is currently selling 1.200 units per month Management is considering using a new component that would increase the unit variable cost by $46. Since the new component would improve 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 if fixed expenses are unaffected? (Negative amount should be indicated by a minus sign.)

Explanation / Answer

Current Policy Particulars Units Rate Amount Sale 1200 200 240000 Less Cost Variable 1200 36 43200 Fixed Cost 130000 Net operating income 66800 New Component Particulars Units Rate Amount Sale 1600 200 320000 Less Cost Material 1600 82 131200 Fixed Cost 130000 Net operating income 58800 Change in Operating Income -8000

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