Asked by Betty ty_re on Jun 16, 2024
Verified
Weitman Corporation manufactures numerous products, one of which is called Epsilon50. The company has provided the following data about this product: What is the net operating income for product Epsilon50 at the current price?
A) $1,430,000
B) $150,000
C) $3,770,000
D) $2,490,000
Net Operating Income
A measure of a company's profitability from its regular, core business operations, calculated as revenue minus operating expenses, excluding taxes and interest.
Current Price
The present market value or selling price of a good, service, or asset.
Product
An item or service created as a result of a process, intended for the market.
- Investigate the effects of selling price alterations on unit sales and net operating income.
Verified Answer
Net Operating Income = (Sales - Variable Costs) - Fixed Costs
= (10,000,000 x 0.15) - (6,000,000 x 0.25) - 2,500,000
= $1,500,000 - $1,500,000 - 2,500,000
= -$500,000
Since the net operating income is negative, the company is incurring losses on this product. Therefore, the best choice is B, which is the only positive value among the given options, and can be considered as the potential profit for the product if the company can improve its cost structure or increase the selling price.
Learning Objectives
- Investigate the effects of selling price alterations on unit sales and net operating income.
Related questions
Certosimo Corporation Has Provided the Following Contribution Format Income Statement ...
Duve Corporation Has Provided the Following Contribution Format Income Statement ...
If the Selling Price Increases by $3 Per Unit and ...
If the Company Increases Its Unit Sales Volume by 4 ...
If the Northern Division's Sales Last Year Were $600,000 Higher ...