A. Requires the investment be increased by the reported net income of the investee.
The competition between Coke and Pepsi is an example of highly elastic demand product. If the price of one of these two will increase, the demand for that product will decrease. This will result to an increase in demand for the other product. Both drinks can quench thirst even though they are marketed differently.
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Answer:
Because fixed costs will not change, the overall effect on the company's monthly net operating income will be equal to the contribution margin of the product once the new component is added.
Explanation:
The contribution margin is equal to: Revenue - Variable Costs.
We already know that the variable cost will be increased by $50 once new component is added, and that monthly sales are expected to increase by 500 units after that.
Depending on the price of the product, the amount sold, and the variable costs, we get the contribution margin, and this contribution margin will be exactly the same as the overall effect on the net operating income.