A Small Business Produces a Single Product and Reports the Following

question 117

Multiple Choice

A small business produces a single product and reports the following data: $$\begin{array} { | l | r | l | } \hline \text { Sales price } & \$ 8.50 & \text { per unit } \\\hline \text { Variable cost } & \$ 5.25 & \text { per unit } \\\hline \text { Fixed cost } & \$ 22,000 & \text { per month } \\\hline \text { Volume } & 10,000 & \text { units per month } \\\hline\end{array}$$ The company believes that the volume will go up to 12,000 units if the company reduces its sales price to $7.50.How would this change affect operating income?

• A)It will increase by $5500.
• B)It will increase by $10,500.
• C)It will decrease by $5500.
• D)It will decrease by $10,500.

---

Definitions:

Hypnosis

A condition of deep attention resembling a trance, where suggestibility is increased, often applied in therapy.

Sympathetic Nervous System

Part of the autonomic nervous system responsible for the body's 'fight or flight' response during stressful situations.

Polygraph

An instrument that measures and records several physiological indicators such as blood pressure, pulse, respiration, and skin conductivity while the subject is asked and answers a series of questions, purported to indicate truthfulness.

Action Potentials

Electrical impulses that travel along the axon of a neuron, allowing it to communicate with other neurons or muscles.