Naumann Corporation produces and sells a single product. Data concerning that product appear below:
Fixed expenses are $234,000 per month. The company is currently selling 4,000 units per month.
Required:
Management is considering using a new component that would increase the unit variable cost by $7. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

Question

Naumann Corporation produces and sells a single product. Data concerning that product appear below:
  Fixed expenses are $234,000 per month. The company is currently selling 4,000 units per month.
Required:
Management is considering using a new component that would increase the unit variable cost by $7. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

Quizplus · Accepted Answer

The Answer of Naumann Corporation produces and sells a single product. Data concerning that product appear below:
  Fixed expenses are $234,000 per month. The company is currently selling 4,000 units per month.
Required:
Management is considering using a new component that would increase the unit variable cost by $7. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

Naumann Corporation Produces and Sells a Single Product