Alden Corporation Produces and Sells a Single Product Fixed Costs Are $110,000 Per Month

question 94

Essay

Alden Corporation produces and sells a single product.Data concerning that product appear below:
$$\begin{array} { | l | r | r | } \hline & \text { Per Uni } & \text { Percent of Sales } \\\hline \text { Selling price } & \$ 190 & 100 \% \\\hline \text { Variable costs } &\underline{ 38} &\underline{ 20 \%} \\\hline \text { Contribution margin } & \$ 152 & 80 \% \\\hline\end{array}$$
Fixed costs are $110,000 per month.The company is currently selling 1,000 units per month.
Required:
Management is considering using a new component that would increase the variable cost per unit by $56.Since the new component would improve the company's product,the marketing manager predicts that monthly sales would increase by 500 units.What should be the overall effect on the company's monthly operating profit of this change if fixed costs are unaffected?

---

Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.