Houpe Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 140 100 % Variable expenses 42 30 % Contribution margin $ 98 70 % Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. Management is considering using a new component that would increase the unit variable cost by $5. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 300 units. What should be the overall effect on the company's monthly net operating income of this change? Multiple Choice decrease of $27,900 increase of $2,100 decrease of $2,100 increase of $27,900

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 5EA: Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of...
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Houpe Corporation produces and
sells a single product. Data
concerning that product appear
below: Per Unit Percent of Sales
Selling price $ 140 100 % Variable
expenses 42 30 % Contribution
margin $ 98 70 % Fixed expenses
are $490,000 per month. The
company is currently selling 6,000
units per month. Management is
considering using a new
component that would increase
the unit variable cost by $5. Since
the new component would
increase the features of the
company's product, the marketing
manager predicts that monthly
sales would increase by 300 units.
What should be the overall effect
on the company's monthly net
operating income of this change?
Multiple Choice decrease of
$27,900 increase of $2,100
decrease of $2,100 increase of
$27,900
Transcribed Image Text:Houpe Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 140 100 % Variable expenses 42 30 % Contribution margin $ 98 70 % Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. Management is considering using a new component that would increase the unit variable cost by $5. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 300 units. What should be the overall effect on the company's monthly net operating income of this change? Multiple Choice decrease of $27,900 increase of $2,100 decrease of $2,100 increase of $27,900
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