Data Concerning Bunck Corporation's Single Product Appear Below: Fixed

question 55

Multiple Choice

Data concerning Bunck Corporation's single product appear below: Fixed expenses are $202,000 per month. The company is currently selling 2,000 units per month. Management is considering using a new component that would increase the unit variable cost by $18. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

• A)decrease of $47,200
• B)decrease of $11,200
• C)increase of $47,200
• D)increase of $11,200

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Definitions:

Normal Credit Balance

The expected or usual balance of a specific account, where liability, equity, and revenue accounts typically have credit balances.

Perpetual Inventory System

An inventory management method where inventory quantities and costs are updated continuously with each sale or purchase.

Accounts Payable

Liabilities of a business that are owed to creditors for goods and services purchased on credit.

Credit To Inventory

An accounting entry that increases the inventory asset account due to purchases on credit.