Ulmer Company has three product lines, X, Y, and Z. The following information is available:

-Assuming Ulmer Company can increase the selling price of product Z to $10,000, all other information remaining constant, operating income will

Question

Ulmer Company has three product lines, X, Y, and Z. The following information is available:
  
-Assuming Ulmer Company can increase the selling price of product Z to $10,000, all other information remaining constant, operating income will

Quizplus · Accepted Answer

From the given information, the contribution margin of product Z is $12,000 - $8,000 = $4,000.

If the selling price of product Z is increased to $10,000, the contribution margin will become $10,000 - $8,000 = $2,000 higher than before.

Assuming that the fixed costs and the sales volume remain constant, the increase in contribution margin will result in an increase in operating income by the same amount, which is $2,000.

Therefore, the correct answer is D: increase $2,000.

Ulmer Company Has Three Product Lines, X, Y, and Z