Thornbrough Corporation produces and sells a single product with the following characteristics: Percent Per Unit of Sales Selling price Variable expenses $ 220 100% 44 20% Contribution margin $ 176 80% The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. Management is considering using a new component that would increase the unit variable cost by $11. Since the new component would increase the features of 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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Thornbrough Corporation produces and sells a single product with the following characteristics:
Percent
Per Unit of Sales
$ 220
Selling price
Variable expenses
100%
44
20%
Contribution margin
$ 176
80%
The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month.
Management is considering using a new component that would increase the unit variable cost by $11. Since the new component would increase the
features of 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?
Transcribed Image Text:Thornbrough Corporation produces and sells a single product with the following characteristics: Percent Per Unit of Sales $ 220 Selling price Variable expenses 100% 44 20% Contribution margin $ 176 80% The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. Management is considering using a new component that would increase the unit variable cost by $11. Since the new component would increase the features of 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?
Bois Corporation has provided its contribution format income statement for January.
$ 426,400
260,000
166,400
120,900
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
$ 45,500
If the company's sales volume increases by 7%, its net operating income should increase by about:
Transcribed Image Text:Bois Corporation has provided its contribution format income statement for January. $ 426,400 260,000 166,400 120,900 Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 45,500 If the company's sales volume increases by 7%, its net operating income should increase by about:
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