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.

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Jerome

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