Starowicz Corporation manufactures numerous products,one of which is called Beta10.The company has provided the following data about this product:
Management is considering decreasing the price of Beta10 by 7%,from $12.00 to $11.16.The company's marketing managers estimate that this price reduction would increase unit sales by 15%,from 120,000 units to 138,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Beta10 earn at a price of $11.16 if this sales forecast is correct?
A) -$40,800
B) $16,080
C) $379,200
D) $436,080

Question

Starowicz Corporation manufactures numerous products,one of which is called Beta10.The company has provided the following data about this product:
 Management is considering decreasing the price of Beta10 by 7%,from $12.00 to $11.16.The company's marketing managers estimate that this price reduction would increase unit sales by 15%,from 120,000 units to 138,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Beta10 earn at a price of $11.16 if this sales forecast is correct?
A) -$40,800 
B) $16,080 
C) $379,200 
D) $436,080

Quizplus · Accepted Answer

Profit = (P - V) × Q - Fixed expenses
Profit = ($11.16 per unit - $8.00 per unit) × 138,000 units - $420,000
Profit = ($3.16 per unit) × 138,000 units - $420,000
Profit = $436,080 - $420,000 = $16,080

Starowicz Corporation Manufactures Numerous Products,one of Which Is Called Beta10