Chruch Corporation manufactures numerous products, one of which is called Tau42. The company has provided the following data about this product:

-Management is considering decreasing the price of Tau42 by 6%,from $64.00 to $60.16.The company's marketing managers estimate that this price reduction would increase unit sales by 10%,from 60,000 units to 66,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Tau42 earn at a price of $60.16 if this sales forecast is correct?
A) -$53,440
B) $969,600
C) -$150,400
D) $1,066,560

Question

Chruch Corporation manufactures numerous products, one of which is called Tau42. The company has provided the following data about this product:
 
-Management is considering decreasing the price of Tau42 by 6%,from $64.00 to $60.16.The company's marketing managers estimate that this price reduction would increase unit sales by 10%,from 60,000 units to 66,000 units.Assuming that the total traceable fixed expense does not change,what net operating income will product Tau42 earn at a price of $60.16 if this sales forecast is correct?
A) -$53,440 
B) $969,600 
C) -$150,400 
D) $1,066,560

Quizplus · Accepted Answer

Profit = (P - V) × Q - Fixed expenses
Profit = ($60.16 per unit - $44.00 per unit) × 66,000 units - $1,120,000
Profit = ($16.16 per unit) × 66,000 units - $1,120,000
Profit = $1,066,560 - $1,120,000 = -$53,440

Chruch Corporation Manufactures Numerous Products, One of Which Is Called