Question

Boggess Corporation manufactures numerous products, one of which is called Alpha41. The company has provided the following data about this product Unit sales (a) Selling price per unit Variable cost per unit Contribution margin per unit (b) Total contribution margin (a) x (b) Traceable fixed expense Net operating income 120,000 $ 86.00 57.00 $ 29.ee $3,480,000 3,150,000 $ 330, eee Management is considering increasing the price of Alpha41 by 10%, from $86.00 to $94,60. The company's marketing managers estimate that this price hike would decrease unit sales by 20%, from 120,000 units to 96,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will product Alpha41 earn at a price of $94.60 if this sales forecast is correct?

$459600

$4512000

$3609600

$136200

Answer 1

Solution:

Unit Sales (a)	96,000
Selling price per unit	$94.60
Variable cost per unit	$57.00
Contribution margin per unit (b)	$37.60
Total contribution margin (a*b)	$3,609,600
Traceable fixed expense	$3,150,000
Net Operating Income	$459,600

The correct option is $459,600

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