Asked by Jessica Green on Jun 03, 2024
Verified
If the company increases its unit sales volume by 4% without increasing its fixed expenses, then total net operating income should be closest to:
A) $12,240
B) $318,240
C) $360,400
D) $311,973
Sales Volume
The number of units of a product or service sold in a specific period of time.
Fixed Expenses
Costs that do not fluctuate with changes in production volume or sales, such as rent, salaries, and insurance premiums.
Net Operating Income
The earnings generated from the primary activities of a business, before subtracting interest and tax expenses.
- Acquire knowledge on the influence of variations in selling price and sales volume on net operating income.
- Learn about the utilization of the degree of operating leverage and how it determines net operating income following changes in sales.
Verified Answer
ZK
Zybrea KnightJun 07, 2024
Final Answer :
C
Explanation :
Unit sales = 680,000 units × 1.04 = 707,200 units
Unit selling price = $2,788,000 ÷ 680,000 units = $4.10 per unit
Variable manufacturing expense per unit = $1,156,000 ÷ 680,000 units = $1.70 per unit
Variable selling and administrative expense per unit = $272,000 ÷ 680,000 units = $0.40 per unit Reference: CHO6-Ref7
A tile manufacturer has supplied the following data:
Unit selling price = $2,788,000 ÷ 680,000 units = $4.10 per unit
Variable manufacturing expense per unit = $1,156,000 ÷ 680,000 units = $1.70 per unit
Variable selling and administrative expense per unit = $272,000 ÷ 680,000 units = $0.40 per unit Reference: CHO6-Ref7
A tile manufacturer has supplied the following data:
Learning Objectives
- Acquire knowledge on the influence of variations in selling price and sales volume on net operating income.
- Learn about the utilization of the degree of operating leverage and how it determines net operating income following changes in sales.
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