Weitman Corporation manufactures numerous products, one of which is called Epsilon-50. The company has provided the following data about this product: Management is considering increasing the price of Epsilon-50 by 9%, from$29.00 to $31.61. The company's marketing managers estimate that this price hike would decrease unit sales by 15%, from 130,000 units to 110,500 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Epsilon 50 earn at a price of $31.61 if this sales forecast is correct?
A) $223,905
B) $1,769,300
C) $489,300
D) $1,503,905

Question

Weitman Corporation manufactures numerous products, one of which is called Epsilon-50. The company has provided the following data about this product:  Management is considering increasing the price of Epsilon-50 by 9%, from$29.00 to $31.61. The company's marketing managers estimate that this price hike would decrease unit sales by 15%, from 130,000 units to 110,500 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Epsilon 50 earn at a price of $31.61 if this sales forecast is correct?
A) $223,905 
B) $1,769,300 
C) $489,300 
D) $1,503,905

Quizplus · Accepted Answer

Profit = (P − V) × Q − Fixed expenses
Profit = ($31.61 per unit − $18.00 per unit) × 110,500 units − $1,280,000
Profit = ($13.61 per unit) × 110,500 units − $1,280,000
Profit = $1,503,905 − $1,280,000 = $223,905

Weitman Corporation Manufactures Numerous Products, One of Which Is Called