Ring, Incorporated's income statement for the most recent month is given below.

For each of the following questions, refer back to the original data.
-A proposal has been made that will lower variable costs in Store P to 65% of sales.However,this reduction can only be accomplished by a $16,000 increase in Store P's traceable fixed costs.If this proposal is implemented and sales remain constant,overall company net operating income should:
A)remain the same
B)decrease by $2,000
C)increase by $2,000
D)increase by $14,000

Question

Ring, Incorporated's income statement for the most recent month is given below.
 
For each of the following questions, refer back to the original data. 
-A proposal has been made that will lower variable costs in Store P to 65% of sales.However,this reduction can only be accomplished by a $16,000 increase in Store P's traceable fixed costs.If this proposal is implemented and sales remain constant,overall company net operating income should:
A)remain the same 
B)decrease by $2,000 
C)increase by $2,000 
D)increase by $14,000

Quizplus · Accepted Answer

Proposed variable expense ratio = 0.65
Proposed variable expenses = 0.65 F1F1F1S1F1F1F10 $200,000 = $130,000
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Ring, Incorporated's Income Statement for the Most Recent Month Is