Answer the Following Questions Using the Information Below

question 88

Multiple Choice

Answer the following questions using the information below:
Gosford Manufacturing produces a single product that sells for $200.Variable costs per unit equal $50.The company expects total fixed costs to be $140 000 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 20% reduction in the selling price will result in a 20% increase in sales.If this proposed reduction in selling price is implemented:

• A)operating profit will decrease by $36 000.
• B)operating profit will decrease by $80 000.
• C)operating profit will increase by $36 000.
• D)operating profit will increase by $44 000.

---

Definitions:

Expense Incurred

A cost that has been realized during the performance of business activities, pending payment or already paid.

Revenue Earned

Income received by a company from its business activities, such as sales of products or services.

Mortgage Payable

A liability account on the balance sheet representing the amount owed by a company or individual for the property's mortgage.

Asset

Resources owned or controlled by a business that are expected to provide future economic benefits, including tangible and intangible items.