Naumann Corporation produces and sells a single product. Data concerning that product appear below: ...

90.2K

Verified Solution

Question

Accounting

Naumann Corporation produces and sells a single product. Data concerning that product appear below:

Per Unit Percent of Sales

Selling price $ 190 100%

Variable expenses 38 20%

Contribution margin $ 152 80%

Fixed expenses are $110,000 per month. The company is currently selling 1,400 units per month.

	Per Unit	Percent of Sales
Selling price	$ 190	100%
Variable expenses	38	20%
Contribution margin	$ 152	80%

Required:

Management is considering using a new component that would increase the unit variable cost by $48. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 600 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected?

Note: Negative amounts should be indicated by a minus sign.

Answer & Explanation Solved by verified expert

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member