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Diamond State Electronics manufactures and sells a specialized cordless...

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Accounting

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Diamond State Electronics manufactures and sells a specialized cordless telephone for nuclear plants. The company's contribution format income statement for 2016 is given below: power Total Description Sales (20,000 units) Variable Expenses Contribution Margin Fixed Expenses Net Operating Income $1,200,000 900,000 S 300,000 240,000 S 60,000 In an effort to increase sales and profits, management is considering the use of a higher quality speaker. The higher quality speaker would increase variable costs by $3 per unit, but management could eliminate one quality inspector who is paid a salary of $30,000 per year. The sales manager estimated that the higher quality speaker would increase annual sales byat least 20% Is this a good decision? How much would Net Operating Income increase OR decrease if upper management decides to make the changes? 2

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