3 Naumann Corporation produces and sells a single product. Data concerning that product appear below: Percent of Sales 100% 20% 80% Selling price Variable expenses Contribution margin Per Unit $ 270 54 $ 216 Fixed expenses are $190,000 per month. The company is currently selling 1,800 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $50. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? (Negative amounts should be indicated by a minus sign.)
3 Naumann Corporation produces and sells a single product. Data concerning that product appear below: Percent of Sales 100% 20% 80% Selling price Variable expenses Contribution margin Per Unit $ 270 54 $ 216 Fixed expenses are $190,000 per month. The company is currently selling 1,800 units per month. Required: Management is considering using a new component that would increase the unit variable cost by $50. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? (Negative amounts should be indicated by a minus sign.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:3
Naumann Corporation produces and sells a single product. Data concerning that product appear below:
Percent of
Sales
100%
20%
80%
Selling price
Variable expenses
Contribution margin
Per Unit
$ 270
54
$ 216
Fixed expenses are $190,000 per month. The company is currently selling 1,800 units per month.
Required:
Management is considering using a new component that would increase the unit variable cost by $50. Since the new component
would improve the company's product, the marketing manager predicts that monthly sales would increase by 500 units. What should
be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? (Negative
amounts should be indicated by a minus sign.)
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