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Pittsboro Corporation produces and sells a single product. Data for that product​ are: Sales price per unit Variable cost per unit Fixed expenses for the month Currently selling units Management is discussing increasing the price to to cover an increase in fixed expenses of . Management believes they might lose​ 2% of sales per month. What should be the overall effect on the​ company's monthly operating income if this change is​ implemented?

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Answer:

The remaining part of the question is:

Round up to the newest whole unit.

OA . 3,572 units

OB.  4,000 units

OC.  3,935 units

OD.  5.269 units

Correct Answer:

OC.  3,935 units

Explanation:

Current sales 2000000 = 4000*500

Less: Variable costs 880000 = 4000*220

Less: Fixed costs 1000000  

Current operating income 120000  

Fixed costs 1080000 =1000000+80000

Add: Operating income 120000  

Required Contribution margin 1200000  

Divide by Contribution margin per unit 305 =525-220

Units to be sold 3935  

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