A company's manager estimates that in the upcoming year, total variable costs will increase by $20,000 and total fixed costs will decrease by $14,000. Assume that the unit sales price did not change. What will be the anticipated effect on net operating income?

Question

Quizplus · Accepted Answer

The net operating income will decrease by $6,000 because the increase in total variable costs ($20,000) is not fully offset by the decrease in total fixed costs ($14,000), resulting in a net increase in total costs of $6,000.

A Company's Manager Estimates That in the Upcoming Year, Total