Arquebus Company is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen and collectors. He is currently producing 40 flintlock muskets per month. Cost data are as follows: In June, the cost of the special kind of metal he uses went up considerably, and the variable cost per unit increased by $50 per unit. The owner believes he can pass along half of the cost increase to his customers by raising the price to $745, and still maintain the same volume of sales. If so, how will this affect his operating income?

Question

Arquebus Company is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen and collectors. He is currently producing 40 flintlock muskets per month. Cost data are as follows:  In June, the cost of the special kind of metal he uses went up considerably, and the variable cost per unit increased by $50 per unit. The owner believes he can pass along half of the cost increase to his customers by raising the price to $745, and still maintain the same volume of sales. If so, how will this affect his operating income?

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The Answer of Arquebus Company is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen and collectors. He is currently producing 40 flintlock muskets per month. Cost data are as follows:  In June, the cost of the special kind of metal he uses went up considerably, and the variable cost per unit increased by $50 per unit. The owner believes he can pass along half of the cost increase to his customers by raising the price to $745, and still maintain the same volume of sales. If so, how will this affect his operating income?

Arquebus Company Is Owned and Operated by a Craftsman Who