Herrell Corporation manufactures numerous products, one of which is called Delta11. The company has provided the following data about this product:

-Management is considering increasing the price of Delta11 by 5%,from $29.00 to $30.45.The company's marketing managers estimate that this price hike would decrease unit sales by 10%,from 110,000 units to 99,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Delta11 earn at a price of $30.45 if this sales forecast is correct?
A) $1,133,550
B) $123,550
C) $249,500
D) $1,259,500

Question

Herrell Corporation manufactures numerous products, one of which is called Delta11. The company has provided the following data about this product:
 
-Management is considering increasing the price of Delta11 by 5%,from $29.00 to $30.45.The company's marketing managers estimate that this price hike would decrease unit sales by 10%,from 110,000 units to 99,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Delta11 earn at a price of $30.45 if this sales forecast is correct?
A) $1,133,550 
B) $123,550 
C) $249,500 
D) $1,259,500

Quizplus · Accepted Answer

Profit = (P - V) × Q - Fixed expenses
Profit = ($30.45 per unit - $19.00 per unit) × 99,000 units - $1,010,000
Profit = ($11.45 per unit) × 99,000 units - $1,010,000
Profit = $1,133,550 - $1,010,000 = $123,550

Herrell Corporation Manufactures Numerous Products, One of Which Is Called