I really apperciate it Pittsboro Corporation produces and se

I really apperciate it!

Pittsboro Corporation produces and sells a single product. Data for that product are Sales price per unit Variable cost per unit Ficed expenses for the month Currently selling $570 S250 $1,250,000 4,000 units Management is discussing increasing the price to $605 to cover an increase in foxed expenses of $83,000. Management believes they might lose 2% of sales per month. What should be the overall effect on the companys monthly operating income if this change is implemented? O A. Increase of $28,600 ? B. Decrease of$83,000 O C. Increase of $83,000 O D. Decrease of $28,600

Solution

Hence overall effect=increase in Net operating income=(58600-30000)=$28600.(A).

	Current	Proposed
Unit Sales	4000 units	(4000(1-0.02)=3920 units
Sales	(4000*570)=$2,280,000	(3920*605)=$2,371,600
Variable cost	(4000*250)=$1,000,000	(3920*250)=$980,000
Contribution margin	$1,280,000	$1,391,600
Fixed expenses	$1,250,000	(1,250,000+83000)=$1,333,000
Net operating income	$30000	$58600.