A Company Produces 1,000 Packages of Chicken Feed Per Month

question 55

Multiple Choice

A company produces 1,000 packages of chicken feed per month.The sales price is $4.00 per pack.Variable cost is $1.60 per unit,and fixed costs are $1,700 per month.Management is considering adding a vitamin supplement to improve the value of the product.The variable cost will increase from $1.60 to $1.70 per unit,and fixed costs will increase by 20%.The company will price the new product at $6 per pack.How will this affect operating income?

• A) Operating income will decrease by $1,560 per month.
• B) Operating income will remain unchanged.
• C) Operating income will decrease by $40 per month.
• D) Operating income will increase by $1,560 per month.

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Definitions:

Zygote

refers to the initial cell formed when a sperm cell fertilizes an egg, marking the beginning of a new organism.

Fertilization

Impregnation of the ovum by the sperm; conception.

Ovulation

The phase of the menstrual cycle during which a mature egg is released from the ovary into the fallopian tube for potential fertilization.

Uterus

A muscular, hollow, pear-shaped organ of the female reproductive tract in which a fertilized ovum develops into a baby.