Acompany produces 1,000 packages of cat food per month. the sales price is $4.00 per pack. variable cost is $1.60 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 increase from $1.60 to $1.80 per unit, and fixed costs will increase by 10%. the company will price the new product at $8 per pack. how will this affect operatingincome?

a.

operating income will remain unchanged.

b.

operating income will increase by $3,620 per month.

c.

operating income will decrease by $2,020 per month.

d.

operating income will decrease by $3,620 per month.

B.  Operating income will increase by $3,620 per month.

Explanation:

In this question, we have to compare the operating income between current and expected proposal which is shown below:

We know that,

Operating income = Sales - variable cost - fixed cost

where,

Sales = Selling price per unit × Number of units produced per month

         = $4 × 1,000

         = $4,000

Variable cost = Variable cost per unit  × Number of units produced per month

                      = $1.60 × 1,000

                      = $1,600

And, the fixed cost is $1,800

Now put these values to the above formula

So, the value would be equal to

= $4,000 - $1,600 - $1,800

= $600

Now for expected proposal

Operating income = Sales - variable cost - fixed cost

where,

Sales = Selling price per unit × Number of units produced per month

         = $8 × 1,000

         = $8,000

Variable cost = Variable cost per unit  × Number of units produced per month

                      = $1.80 × 1,000

                      = $1,800

And, the fixed cost is $1,800 + $180 = $1,980

Now put these values to the above formula

So, the value would be equal to

= $8,000 - $1,800 - $1,980

= $4,220

The difference would be

= $4,220 - $600

= $3,620

Jose should tell George about the comparison sites the way it helps to compare the price of different products in different outlets s well cross different brands, however, the results are not always perfect and accurate.

Explanation

The Business Model of Price Comparison Sites is immensely useful and makes a clear cut comparison of different products concerning their brands and various market outlets. These comparison sites help create a better rapport with customers as also it helps create value for the products, however, at the same time Price Comparison sites are not considered to be the best and perfect way of determining prices.Price Comparison sites are laden with lots of imperfections that makes it a little inaccurate and undesirable. The first flow of Business model price comparison sites is that they don't consider the competitor's price which leads to overpricing of one's product. As a result of this overpricing, customer demand for such products goes down and eventually loss for the company. The other imperfection which is there in business model price comparison is that companies while pricing product takes into consideration several criteria and determinants which are not considered by business models. Therefore, this often leads to overpricing and under-pricing. Furthermore, differences in the price of the product on the website and the one determined by the price comparison model also points to imperfection.