Chovanec Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 170 100% Variable expenses 68 40% Contribution margin $ 102 60% Fixed expenses are $521,000 per month. The company is currently
Chovanec Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 170 100% Variable expenses 68 40% Contribution margin $ 102 60% Fixed expenses are $521,000 per month. The company is currently
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 5EA: Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of...
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Question
Chovanec Corporation produces and sells a single product. Data concerning that product appear below:
| Per Unit | Percent of Sales | |
|---|---|---|
| Selling price | $ 170 | 100% |
| Variable expenses | 68 | 40% |
| Contribution margin | $ 102 | 60% |
Fixed expenses are $521,000 per month. The company is currently selling 7,000 units per month. Management is considering using a new component that would increase the unit variable cost by $6. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change?
Multiple Choice
-
increase of $6,000
-
decrease of $6,000
-
decrease of $48,000
-
increase of $48,000
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