Boggess Corporation manufactures numerous products, one of which is called Alpha41. The company has provided the following data about this product:

-Management is considering increasing the price of Alpha41 by 10%,from $86.00 to $94.60.The company's marketing managers estimate that this price hike would decrease unit sales by 20%,from 120,000 units to 96,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Alpha41 earn at a price of $94.60 if this sales forecast is correct?
A) $459,600
B) $4,512,000
C) $3,609,600
D) $1,362,000

Question

Boggess Corporation manufactures numerous products, one of which is called Alpha41. The company has provided the following data about this product:
 
-Management is considering increasing the price of Alpha41 by 10%,from $86.00 to $94.60.The company's marketing managers estimate that this price hike would decrease unit sales by 20%,from 120,000 units to 96,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Alpha41 earn at a price of $94.60 if this sales forecast is correct?
A) $459,600 
B) $4,512,000 
C) $3,609,600 
D) $1,362,000

Quizplus · Accepted Answer

Profit = (P - V) × Q - Fixed expenses
Profit = ($94.60 per unit - $57.00 per unit) × 96,000 units - $3,150,000
Profit = ($37.60 per unit) × 96,000 units - $3,150,000
Profit = $3,609,600 - $3,150,000 = $459,600

Boggess Corporation Manufactures Numerous Products, One of Which Is Called