Kinsley Corporation manufactures numerous products, one of which is called Kappa03. The company has provided the following data about this product:

-Management is considering increasing the price of Kappa03 by 7%,from $36.00 to $38.52.The company's marketing managers estimate that this price hike would decrease unit sales by 10%,from 50,000 units to 45,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Kappa03 earn at a price of $38.52 if this sales forecast is correct?
A) $626,000
B) $563,400
C) $156,000
D) $93,400

Question

Kinsley Corporation manufactures numerous products, one of which is called Kappa03. The company has provided the following data about this product:
 
-Management is considering increasing the price of Kappa03 by 7%,from $36.00 to $38.52.The company's marketing managers estimate that this price hike would decrease unit sales by 10%,from 50,000 units to 45,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Kappa03 earn at a price of $38.52 if this sales forecast is correct?
A) $626,000 
B) $563,400 
C) $156,000 
D) $93,400

Quizplus · Accepted Answer

Profit = (P - V) × Q - Fixed expenses
Profit = ($38.52 per unit - $26.00 per unit) × 45,000 units - $470,000
Profit = ($12.52 per unit) × 45,000 units - $470,000
Profit = $563,400 - $470,000 = $93,400

Kinsley Corporation Manufactures Numerous Products, One of Which Is Called