Question

Cobble Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...

Cobble Corporation produces and sells a single product. Data concerning that product appear below:

Per Unit Percent of Sales
Selling price $ 160 100 %
Variable expenses 48 30 %
Contribution margin $ 112 70 %

Fixed expenses are $499,000 per month. The company is currently selling 5,000 units per month. The marketing manager would like to cut the selling price by $13 and increase the advertising budget by $33,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 800 units. What should be the overall effect on the company's monthly net operating income of this change?

Multiple Choice

  • increase of $47,200

  • increase of $14,200

  • decrease of $18,800

  • decrease of $8,900

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ANSWER: OPTION C= DECREASE OF 18800

Current status: (5000UNITS PER MONTH)

PARTICULAR AMOUNT($)
SALES 160*5000 800000
(-) VARIABLE COST 48 (30% OF SALES) (240000)
CONTRIBUTION 112(70% OF SALE) 560000

(-)FIXED COST

 (499000)
PROFIT 61000

New proposal( 5800 UNITS PER MONTH)

PARTICULAR AMOUNT ($)
SALES (147*5800) 852600
(-) VARIABLE COST 48*5800 (278400)
CONTRIBUTION 574200
(-) FIXED COST 499000+33000 (532000)
PROFIT 42200

61000-42200=18800

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Montgomery Corporation produces and sells a single product. Data concerning that product appear: Selling price ------------...
Montgomery Corporation produces and sells a single product. Data concerning that product appear: Selling price ------------ $240 per unit Variable expenses -----    144 Contribution margin ---    $96 Fixed expenses are $239,000 per month. The company is currently selling 3,000 units per month. The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $12,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should...
Salley Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Salley Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 196 100 % Variable expenses 49 25 % Contribution margin 147 75 % Fixed expenses are $1,250,000 per month. The company is currently selling 9,400 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...
Bethard Corporation produces and sells a single product. Data concerning that product appear below: Selling price...
Bethard Corporation produces and sells a single product. Data concerning that product appear below: Selling price $120 per unit Variable expenses 24 per unit Contribution margin $96 per unit Fixed expenses are $354,000 per month. The company is currently selling 5,000 units per month. Required: The marketing manager would like to cut the selling price by $8 and increase the advertising budget by $23,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 600...
Bethard Corporation produces and sells a single product. Data concerning that product appear below: Selling price...
Bethard Corporation produces and sells a single product. Data concerning that product appear below: Selling price $120 per unit Variable expenses 24 per unit Contribution margin $96 per unit Fixed expenses are $354,000 per month. The company is currently selling 5,000 units per month. Required: The marketing manager would like to cut the selling price by $8 and increase the advertising budget by $23,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 600...
Nice Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Nice Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 260 100 % Variable expenses 65 25 % Contribution margin $ 195 75 % Fixed expenses are $180,000 per month. The company is currently selling 1,300 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $54. Since the new component would improve the company's product, the marketing manager...
Socrates Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Socrates Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 140 100 % Variable expenses 56 40 % Contribution margin $ 84 60 % The company is currently selling 6,000 units per month. Fixed expenses are $202,000 per month. The marketing manager believes that a $7,200 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect...
Naumann Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Naumann Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 190 100 % Variable expenses 38 20 % Contribution margin $ 152 80 % Fixed expenses 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 unit variable cost by $56. Since the new component would improve the company's product, the marketing manager...
Shelhorse Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Shelhorse Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 100 100 % Variable expenses 30 30 % Contribution margin $ 70 70 % Fixed expenses are $356,000 per month. The company is currently selling 5,100 units per month. Required: The marketing manager believes that a $13,000 increase in the monthly advertising budget would result in a 250 unit increase in monthly sales. What should be the overall...
Shelhorse Corporation produces and sells a single product. Data concerning that product appear below: Per Unit...
Shelhorse Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 280 100% Variable expenses 126 45% Contribution margin $ 154 55% Fixed expenses are $354,000 per month. The company is currently selling 4,900 units per month. Required: The marketing manager believes that a $23,000 increase in the monthly advertising budget would result in a 170 unit increase in monthly sales. What should be the overall effect on the...
Data concerning Bazin Corporation's single product appear below: Per Unit Percent of Sales Selling price $...
Data concerning Bazin Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 100 100 % Variable expenses 20 20 % Contribution margin $ 80 80 % Fixed expenses are $384,000 per month. The company is currently selling 6,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT