Roy's Raingear Produces a Single Product and Reports the Following

question 7

Multiple Choice

Roy's Raingear produces a single product and reports the following data: $\begin{array}{|l|r|l|}\hline \text { Price } & \$ 8.84 &\text { per unit } \\\hline \text { Variable cost } & \$ 6 & \text { per unit } \\\hline \text { Fixed cost } & \$ 21,000 &\text { per month } \\\hline \text { Volume } & 13,000 &\text { per month } \\\hline\end{array}$ If the company reduces its price to $7.75,it believes that the volume will go up to 15,000 units.
How would this change affect operating income?

• A) It will go up by $10,670.
• B) It will go up by $15,920.
• C) It will go down by $10,670.
• D) It will go down by $15,920.

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Definitions:

Anxiety Disorder

A category of mental health disorders characterized by significant and persistent fear, anxiety, or avoidance behaviors.

Lethargic Hopelessness

A state characterized by a lack of energy and a pervasive sense of despair or pessimism.

Overexcitement

A state of being excessively stimulated or enthusiastic, often leading to erratic behavior or emotional overwhelm.

DSM-IV-TR

The Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, Text Revision; a guide published by the American Psychiatric Association for diagnosing mental disorders.