Carlos Naturals Manufactures Bulk Quantities of Cleaning Fluids

question 15

Multiple Choice

Carlos Naturals manufactures bulk quantities of cleaning fluids.The company currently sells 700 containers a month at a sales price of $24 per unit.The addition of a new disinfectant will result in a sales price of $26 per unit for the improved product.It would cost a total of $4000 per month to make the alteration.Operating income would ________.

• A)decline by $16,800
• B)increase by $4000
• C)increase by $2600
• D)decline by $2600

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales activity.

Operating Income

Income from a company's main business operations, excluding expenses and revenues from non-operational activities.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including expenses like rent, wages, and insurance premiums.