Data Concerning Pellegren Corporation's Single Product Appear Below: Fixed

question 171

Multiple Choice

Data concerning Pellegren Corporation's single product appear below: Fixed expenses are $531,000 per month.The company is currently selling 4,000 units per month.The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $35,000 per month.The marketing manager predicts that these two changes would increase monthly sales by 500 units.What should be the overall effect on the company's monthly net operating income of this change?

• A)decrease of $18,000
• B)increase of $38,000
• C)decrease of $38,000
• D)increase of $58,000

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Definitions:

Impairment Loss

A reduction in the recoverable amount of a fixed asset or goodwill below its carrying amount, recognized as an expense.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been expensed since the asset was put into use.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) for global use.

Revaluation Model

An accounting method for periodically adjusting an asset's value on the balance sheet to reflect its current market value.