Chovanec Corporation Produces and Sells a Single Product

question 195

Multiple Choice

Chovanec Corporation produces and sells a single product.Data concerning that product appear below: 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?

• A)decrease of $48,000
• B)decrease of $6,000
• C)increase of $48,000
• D)increase of $6,000

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Definitions:

Central America-Dominican Republic Free Trade Agreement (CAFTA-DR)

A free trade agreement aimed at creating economic growth and facilitating trade between the United States, Central America, and the Dominican Republic.

U.S. Sugar Producers

Companies or entities involved in the cultivation, processing, and selling of sugar within the United States.

Relaxed Trade Rules

Eased regulatory provisions governing international trade, intended to simplify the process of buying and selling goods across borders.

Euro

The official currency used by the majority of the member countries of the European Union.