Zippy Company Has a Product That It Currently Sells in the Market

question 114

Multiple Choice

Zippy Company has a product that it currently sells in the market for $50 per unit. Zippy has developed a new feature that, if added to the existing product, will allow Zippy to receive a price of $65 per unit. The total cost of adding this new feature is $26,000 and Zippy expects to sell 1,600 units in the coming year. What is the net effect on next-year's operating income of adding the feature to the product?

• A) $2,000 increase in operating income.
• B) $3,000 decrease in operating income.
• C) $3,500 increase in operating income.
• D) $4,000 decrease in operating income.
• E) $2,000 decrease in operating income.

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Definitions:

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