Multiple Choice
Answer the following questions using the information below:
Martha Manufacturing produces a single product that sells for $80. Variable costs per unit equal $32. The company expects total fixed costs to be $72,000 for the next month at the projected sales level of 2,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.
-Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented:
A) operating income will decrease by $8,000
B) operating income will increase by $8,000
C) operating income will decrease by $16,000
D) operating income will increase by $16,000
Correct Answer:
Verified
Correct Answer:
Verified
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