Salley Corporation Produces and Sells a Single Product

question 21

Multiple Choice

Salley Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $1, 133, 000 per month.The company is currently selling 9, 000 units per month.Management is considering using a new component that would increase the unit variable cost by $7.Since the new component would increase the features of 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 net operating income of this change?

• A)decrease of $68, 500
• B)decrease of $5, 500
• C)increase of $68, 500
• D)increase of $5, 500

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Definitions:

Lactation

The production of milk in the breasts (mammary glands).

Tangible Attributes

The physical characteristics of a product that can be sensed, such as its size, shape, weight, and texture.

Intangible Attributes

Characteristics of a product or service that cannot be physically touched or measured, such as brand reputation or customer service quality.

Organizational Buyers

Those who make purchasing decisions on behalf of a company or organization, often including considerations like bulk buying, contractual negotiations, and supplier relationships.