Answer the Following Questions Using the Information Below

question 129

Multiple Choice

Answer the following questions using the information below:
Martha Manufacturing produces a single product that sells for $80. Variable costs per unit equal $32. The company expects total fixed costs to be $72,000 for the next month at the projected sales level of 2,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.
-Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented:

• A)operating income will decrease by $8,000
• B)operating income will increase by $8,000
• C)operating income will decrease by $16,000
• D)operating income will increase by $16,000

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Definitions:

Investment Centres

Business segments or units within an organization that are responsible for their own revenues, expenses, and asset investments.

Performance Evaluation

The systematic assessment of an employee, process, or organization's performance, usually against set objectives or criteria.

Return on Equity

A measure of financial performance calculated by dividing net income by shareholder equity, indicating how efficiently a company uses its equity to generate profit.

Investment Turnover

A metric assessing how effectively a company utilizes its investments to produce sales income.