Question
ABC Company produces and sells a single product. Data pertaining to ABC Company is presented in the chart below. Per Unit Percent of Sales Selling
ABC Company produces and sells a single product. Data pertaining to ABC Company is presented in the chart below.
| Per Unit | Percent of Sales | ||
| Selling price | $ | 220 | 100% |
| Variable expenses | 44 | 20% | |
| Contribution margin | $ | 176 | 80% |
| Fixed expenses are $140,000 per month. The company is currently selling 1,300 units per month. |
| Management is considering using a new component that would increase the unit variable cost by $52. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. |
| Required: |
| What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.) |
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Essentials Of Marketing
Authors: David Brown, Alex Thompson
1st Edition
0367773422, 9780367773427
