Data Concerning Fowler Corporation's Single Product Appear Below Fixed Costs Are $444,000 Per Month

question 126

Essay

Data concerning Fowler Corporation's single product appear below:
$$\begin{array} { l r c } & \text { Per Unit } & \text { Percent of Sales } \\\text { Selling price } & \$ 210 & 100 \% \\\text { Variable costs } & 126 & 60 \% \\\text { Contribution margin } & \$ 84 & 40 \% \\\end{array}$$
Fixed costs are $444,000 per month. The company is currently selling 7,000 units per month.
Required:
Management is considering using a new component that would increase the unit variable cost by $2. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 200 units. What should be the overall effect on the company's monthly operating profit of this change if fixed costs are unaffected?

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Definitions:

Misleading Statement

A statement or claim that provides false, inaccurate, or deceptive information intended to manipulate or deceive.

Leadership Models

Models that describe different approaches and styles used by leaders to guide, motivate, and manage teams.

Theory X/Theory Y

A concept of human motivation and management developed by Douglas McGregor, describing two contrasting models of workforce motivation and behavior.

Traits Model

A psychological theory that attributes personality to a set of stable and enduring characteristics or traits possessed by individuals.