Victory Tire Company makes a special kind of racing tire
Variable costs are $210 per unit, and fixed costs are $30,000 per month. Victory sells 700 units per month at a sales price of $310. If the quality of the tire is upgraded, the company believes it can increase the sales price to $350. If so, the variable cost will increase to $240 per unit, and the fixed costs will remain the same. If Victory decides to upgrade, how will it affect operating income?
A) Operating income will decrease by $7,000.
B) Operating income will decrease by $21,000.
C) Operating income will increase by $21,000.
D) Operating income will increase by $7,000.
D .D)
Sales as is Further processing
Sales revenue $217,000 $245,000
Less: Variable cost 147,000 168,000
Contribution margin per unit $70,000 $77,000
Increase in operating income $7,000
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Which of the following statements about marginal analysis is true?
A) Marginal analysis is typically a straightforward procedure to apply in real-life situations. B) An important factor in marginal analysis is predicting demand, which is an exact science. C) Marginal revenue is also the demand curve, so it represents the amount customers will buy at different prices. D) Profit is maximized at the point at which marginal cost is exactly equal to marginal revenue. E) The cost of producing a unit beyond the point when marginal cost equals marginal revenue is much less than the revenue from the sale of that unit.
Differences in language and national character have similar effects as trade barriers
Indicate whether the statement is true or false