Vineyard Company has three product lines: A,B and C.The following annual information is available: Assume Vineyard Company can increase the selling price of Product C to $30,000.Assume all other information remains the same.What will happen to operating income?
A)increase $3,600
B)increase $6,000
C)decrease $3,600
D)decrease $6,000

Question

Vineyard Company has three product lines: A,B and C.The following annual information is available:  Assume Vineyard Company can increase the selling price of Product C to $30,000.Assume all other information remains the same.What will happen to operating income?
A)increase $3,600 
B)increase $6,000 
C)decrease $3,600 
D)decrease $6,000

Quizplus · Accepted Answer

Currently, the operating income for Product C is $6,000 ($30,000 - $24,000). If Vineyard Company can increase the selling price of Product C to $30,000, the new operating income will be $12,000 ($30,000 - $18,000). This is an increase of $6,000 ($12,000 - $6,000). Therefore, the best choice is B, which states that operating income will increase by $6,000.

Vineyard Company Has Three Product Lines: A,B and C