Production and financial information for Daytona Corp is presented below: Number of units sold 8,000

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Production and financial information for Daytona Corp is presented below:

Number of units sold 8,000 units

Total Sales Revenue $480,000

Variable Costs

Cost of Goods Sold (176,000)

Fixed Costs

Fixed Rent   (225,000)

Net Operating Income $ 79,000

Suppose that the company proposes the following operational changes:

1.     Increase capacity by renting another plant at an annual cost of $121,000 per year

(increasing Fixed Rent from $225,000 to $346,000).  

2.    Increase the sales price/unit from $50/unit to $68 per unit.

As a result of the increased capacity (#1) and increased sales price (#2), forecasted unit sales are expected to increase by 5,000 units (from 8,000 to 13,000 units per year).

Assuming these operational changes are implemented, provide Daytona Corp’s REVISED NET OPERATING INCOME.   

Select one:

a. $119,000

b. None of the other answers are correct

c. $419,000

d. $94,000

e. $252,000

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