Woodridge Corporation manufactures numerous products,one of which is called Alpha32.The company has provided the following data about this product:
Management is considering increasing the price of Alpha32 by 4%,from $99.00 to $102.96.The company's marketing managers estimate that this price hike would decrease unit sales by 5%,from 90,000 units to 85,500 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Alpha32 earn at a price of $102.96 if this sales forecast is correct?
A) $556,400
B) $2,246,400
C) $444,080
D) $2,134,080

Question

Woodridge Corporation manufactures numerous products,one of which is called Alpha32.The company has provided the following data about this product:
 Management is considering increasing the price of Alpha32 by 4%,from $99.00 to $102.96.The company's marketing managers estimate that this price hike would decrease unit sales by 5%,from 90,000 units to 85,500 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Alpha32 earn at a price of $102.96 if this sales forecast is correct?
A) $556,400 
B) $2,246,400 
C) $444,080 
D) $2,134,080

Quizplus · Accepted Answer

Profit = (P - V) × Q - Fixed expenses
Profit = ($102.96 per unit - $78.00 per unit) × 85,500 units - $1,690,000
Profit = ($24.96 per unit) × 85,500 units - $1,690,000
Profit = $2,134,080 - $1,690,000 = $444,080

Woodridge Corporation Manufactures Numerous Products,one of Which Is Called Alpha32