Final Exam FA17-ACG 2071-99437 Th 2-4 45 Test: Final Exam This Question: 1 pt 60
ID: 2598128 • Letter: F
Question
Final Exam FA17-ACG 2071-99437 Th 2-4 45 Test: Final Exam This Question: 1 pt 60150 (0 complete) A small business produces a single product and reports the following data: Sales price Variable cost Fixed cost $8.00 per unit S5.30 per unit $21,000 per month units per Volume 10,500 month The company believes that the volume will go up to 11,000 units if the company reduces its sales price to $7.50. How would this change affect operating income? 0 A. It will increase by S4150 O B. It will decrease by $7,350 ° C. It will decrease by $4,150 O D. It will increase by $7,350Explanation / Answer
Particulars
Present
Belief
Calculation
Amount
Calculation
Amount
Sales
10500*8
84000
11000*7.50
82500
Less: Variable Costs
10500*5.3
55650
11000*5.3
58300
Contribution
28350
24200
Less: Fixed Costs
21000
21000
Operating Income
7350
3200
Decrease in Operating Income (7350 - 3200)
4150
Therefore, the right answer is option (c) it will decrease by $ 4150
Particulars
Present
Belief
Calculation
Amount
Calculation
Amount
Sales
10500*8
84000
11000*7.50
82500
Less: Variable Costs
10500*5.3
55650
11000*5.3
58300
Contribution
28350
24200
Less: Fixed Costs
21000
21000
Operating Income
7350
3200
Decrease in Operating Income (7350 - 3200)
4150
Therefore, the right answer is option (c) it will decrease by $ 4150
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