A Small Business Produces a Single Product and Reports the Following

question 45

Multiple Choice

A small business produces a single product and reports the following data: $$\begin{array} { | l | l | l | } \hline \text { Sales price } & \$ 8.50 & \text { per unit } \\\hline \text { Variable cost } & \$ 5.25 & \text { per unit } \\\hline \text { Fixed cost } & \$ 22,000 & \text { per month } \\\hline \text { Volume } & 10,000 & \text { units per month } \\\hline\end{array}$$ The company believes that the volume will go up to 12,000 units if the company reduces its sales price to $7.50.How would this change affect operating income?

• A) It will increase by $5500.
• B) It will increase by $10,500.
• C) It will decrease by $5500.
• D) It will decrease by $10,500.

---

Definitions:

Townshend Duties

Taxes imposed by the British Parliament on the American colonies in 1767 on goods such as tea, glass, and paper, contributing to rising tensions leading to the American Revolution.

Sons of Liberty

An organization of American patriots during the British colonial period, committed to fighting taxation by the British government.

Virtual Representation

A concept in British parliamentary law meaning that members of Parliament represented all British subjects, including those in the colonies who did not vote for them.

John Locke

A 17th-century English philosopher and physician, widely regarded as one of the most influential of Enlightenment thinkers, known for his contributions to the development of political philosophy and the concepts of individual rights and the social contract.