Houpe Corporation Produces and Sells a Single Product

question 32

Multiple Choice

Houpe Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month.
Management is considering using a new component that would increase the unit variable cost by $5. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 300 units. What should be the overall effect on the company's monthly net operating income of this change?

• A) decrease of $2,100
• B) decrease of $27,900
• C) increase of $2,100
• D) increase of $27,900

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Definitions:

Drawer's Signature

is the signature of the person who has written and is responsible for the financial instrument, such as a check, authorizing its use and the payment it represents.

Customer's Negligence

A situation where a customer's failure to exercise reasonable care results in harm or damage.

Re-Credit

The process of restoring a previously deducted amount back into an account or credit rating.

Dishonored

describes a financial instrument, such as a check or a bill, that has been refused payment by the bank or person it was presented to.