Spotless Naturals manufactures bulk quantities of cleaning fluids.It currently sells 1200 containers a month at a sales price of $20.00 per unit.If a new fragrance is added,$24.00 per unit could be charged for the improved product.It would cost a total of $800 per month to make that alteration.Operating income would ________.

Question

Quizplus · Accepted Answer

The company currently sells 1200 containers a month at a sales price of $20.00 per unit. Therefore, the current revenue is:
1200 x $20 = $24,000

If a new fragrance is added, the sales price would be increased by $4.00 per unit ($24-$20). Therefore, the revenue from selling 1200 containers with the new fragrance would be:
1200 x $24 = $28,800

The cost of making the alteration is $800 per month. Therefore, the new operating income would be:
($28,800 - $800) - ($24,000) = $4,000

So, the operating income would increase by $4,000 if the new fragrance is added. Therefore, the correct answer is C.

Spotless Naturals Manufactures Bulk Quantities of Cleaning Fluids