European International has 3 separate business units in the following countries. Data for each of the business units is given below:$\begin{array}{|l|l|l|l|}
\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\
\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \
\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \
& \text { unit } & \text { unit } & \text { unit } \
\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \
\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \
\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \
\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\
\hline
\end{array}$
-If the business unit in France expects to produce and sell 5,000 units next month, the expected net operating income would be

Question

European International has 3 separate business units in the following countries. Data for each of the business units is given below:$\begin{array}{|l|l|l|l|}
\hline&\text { France } & 5 p \mathrm{a} i n & \text { italy }\
\hline \text { Selling price per unit } & £ 35 & £ 38 & £ 42 \
\hline \text { Manufacturing cost } & £ 4,000 \text { per month plus } £ 17 \text { per } & £ 3,500 \text { per month plus } £ 18 \text { per } & £ 5,000 \text { per month plus } £ 20 \text { per } \
& \text { unit } & \text { unit } & \text { unit } \
\hline \text { Administrative } & £ 2,500 \text { per month plus } £ 2.50 & £ 2,900 \text { per month plus } £ 2.90 & £ 3,500 \text { per month plus } £ 3.50 \
\text { expense } & \text { per unit } & \text { per unit } & \text { per unit } \
\hline \text { Sales commissions } & 15 \% \text { of sales } & 16 \% \text { of sales } & 20 \% \text { of sales } \
\hline \text { Advertising expense } & £ 2,000 \text { per month } & £ 3,000 \text { per month } & £ 2,000 \text { per month }\
\hline
\end{array}$ 
-If the business unit in France expects to produce and sell 5,000 units next month, the expected net operating income would be

Quizplus · Accepted Answer

We are given the net operating income for each business unit and the expected sales for the French unit. To calculate the expected net operating income for the French unit, we need to multiply the expected sales (5,000 units) by the contribution margin per unit (which is the selling price per unit minus the variable cost per unit).

For the French unit, the contribution margin per unit is £15 - £5 = £10.

Therefore, the expected net operating income for the French unit is:

Net operating income = (Expected sales * Contribution margin per unit) - Fixed expenses

Net operating income = (5,000 units * £10 per unit) - £7,250

Net operating income = £42,750

Therefore, the best choice is B.

European International Has 3 Separate Business Units in the Following