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shtirl [24]
3 years ago
12

Titanic Roofing Company has estimated the following amounts for its next fiscal​ year: Total fixed costs $ 833 comma 000 Sale pr

ice per unit 60 Variable cost per unit 30 If the company spends an additional $ 30 comma 000 on​ advertising, sales volume would increase by 2 comma 500 units. Before the​ change, the​ company's sales level exceeds the breakeven point. What effect will this decision have on the operating income of​ Titanic? A. Operating income will decrease by $ 45 comma 000. B. Operating income will increase by $ 45 comma 000. C. Operating income will increase by $ 75 comma 000. D. Operating income will increase by $ 150 comma 000.
Business
1 answer:
vitfil [10]3 years ago
4 0

Answer: B. Operating income will increase by $ 45,000

Explanation:

Total fixed cost = $833,000

Sale price per unit = 60

Variable cost per unit = 30

Advertising = $30,000

Increase in sales volume = 2500

The contribution margin is the difference between the sales price per unit and the variable cost per unit.

= 60 - 30

= 30

Therefore, Hence the increase in the contribution margin will be:

= ($30 × 2500)=$75000

We then subtract the additional cost of $30,000 from $75,000. This will be:

= $75,000 - $30,000

= $45,000

Therefore, operating income will increase by $45,000

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Answer:

1. The ethical issue here is that Becky Knauer's new boss usually bribes the sales manager of a car dealership to get more quota of cars. He is doing this because the car is in high demand. The higher his quota, the higher the number of cars. The higher the number of cars, the more of them he can sell. The more he can sell, the higher the profits.

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First, the action of Becky's boss is wrong, but it is also helping to keep the business afloat thus translating to securing her job and probably sustaining the pay she is receiving. We know this because Becky's former employer who receives just 25 cars a month is not very profitable.  

Becky as the Controller, however, is in charge of Compliance. The actions of her boss are unethical. She has to flag such issues and report to him.

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2.  Becky's options are as follows:

A. If she is too scared to confront her boss, she can decide to resign. She would have lost her job. There is no guarantee she will get another and the unethical practices will continue.

B. She can raise the issue with her boss and point out the dangers of continuing in such practice. By doing this, she is ruling out the possibility that he somehow is unaware of the dangers of his actions. In raising the matter with her boss, she must do this in black and white.

The above decision can go either left or right.  

Right means that her boss comes to understand the import of his actions and makes amends. Left means, he gets jittery and fires her.

3. As stated above, Franz may fire Becky if she flags his actions.

If this happens, she can take the matter to the State of New Jersy Motor Commission and possibly sue Franz for wrongful dismissal.      

Cheers!

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