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Pavir Corporation produces and sells a single product. The following information has been provided about the product. Selling price Variable expenses Contribution margin Percent
Pavir Corporation produces and sells a single product. The following information has been provided about the product. Selling price Variable expenses Contribution margin Percent of Per Unit Sales $220 100% 55 25% $165 75% Fixed expenses are $190,000 per month. The company is currently selling 1,800 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $45. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected?
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