Answer the Following Questions Using the Information Below

question 75

Multiple Choice

Answer the following questions using the information below:
Ghan 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 2000 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 profit will decrease by $8000.
• B)operating profit will increase by $8000.
• C)operating profit will increase by $16 000.
• D)operating profit will decrease by $16 000.

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Definitions:

Wear Out Allowance

A depreciation method that factors in the reduction of an asset's value due to physical wear and tear over time.

Investments

The allocation of resources, typically money, in the expectation of generating an income or profit.

National Income

The total value of all goods and services produced by a country's economy over a specific period, including income from abroad, indicating economic health.

Salaries

Regular payments made by an employer to an employee, usually on a monthly or biweekly basis, for professional services rendered.