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o! VCU.edu-Cen..tion Service NOVA Login MindTap Th...o1-Cengage Watch TV Onl...NITY Stream - Central nstructions Multiple Attempts This test allows multiple attempts. Force Completion This test can be saved and resumed later A. 1 Material-ACCT-2 Take Test: BB quiz... Bank - Chapter 6 Goo Question Completion Status: Close Window Moving to another question will save this response. Question 14 of 15 Question 14 1 points Save Answe Your Company\'s single product has a selling price of $15 per unt. Last year the company variable costs were $9 per unit, fixed expenses manager discloses that a 15% increase in the selling price would adopted, what would net operating income become? HINT: These are the same numbers as the last question. You want to use your answer from last probiem were $90,000, and a net operating income of was $30,000. A study by the sales reduce unit sales by 10%. If her proposal is TIONS ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIP Question 14 of 15 Moving to another question will save this response. Close Window 1 delo 7

Solution

Contribution margin for last year = revenue per unit – variable cost per unit = 15-9 = $6 per unit.

Total fixed expenses = $90,000

Net operating income = total contribution margin – total fixed expenses = $30,000

Let no. of units sold be “x”. Thus 6x-90,000 = 30,000

Or 6x = 120,000

Or x = 20,000.

Now if selling price is increased by 15% then new selling price = $15*1.15 = $17.25. New unit sales = 20,000 units*(1-10%) = 18,000 units.

Thus net operating income = (revenue per unit-variable cost per unit)*no. of units – fixed expenses

= (17.25-9)*18,000 – 90,000

= 58500.