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Question
A company produces 1,000 packs of chicken feed per month. Sales price is $4.00 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will go up from $1.50 to $1.90 per unit, but there will be no change in fixed costs. The company will price the new product at $4.25 to compete with other producers. If they do so, how will this affect operational income?
A) Go down $150 per month
B) Go up $250 per month
C) Go down $400 per month
D) Remain unchanged
Answer
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Related questions
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