Carlo Company Makes Bulk Quantities of Cleaning Fluids

question 156

Multiple Choice

Carlo Company makes bulk quantities of cleaning fluids. They currently sell 1,000 containers a month at a price of $22 per unit. If they added a disinfectant, they could charge $25 per unit for the improved product. It would cost them a total of $3,800 per month to make that alteration. What would be the effect on operating income?

• A)It would decline by $1,200.
• B)It would increase by $3,000.
• C)It would increase by $400.
• D)It would decline by $800.

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Definitions:

Transaction Costs

Expenses incurred when buying or selling goods and services, encompassing fees, taxes, and other costs.

Middlemen

People who buy and sell goods or services or arrange trades. A middleman reduces transaction costs.

Transaction Costs

Expenses incurred when buying or selling goods and services, which can include fees, taxes, and other charges.

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