Carlos Naturals manufactures bulk quantities of cleaning fluids. The company currently sells 800 containers a month at a sales price of $ 24 per unit. The addition of a new disinfectant will result in a sales price of $ 26 per unit for the improved product. It would cost a total of $ 4 comma 000 per month to make the alteration. Operating income would .

Operating income would decrease

Explanation:

Operating income or income from operations is the amount of profit realized from business operations, after all the expenses have been deducted.

To calculate this, we have to first of all determine if after the improvement of the product, the net income decreases or increases, taking the cost of improvement into consideration.

First, let us calculate the additional amount made after the sale of the improved product.

Improved unit price = $26

original unit price = $24

difference = 26 - 24 = $2

number of containers(units) sold = 800

Therefore additional income realized due to improvement = 800 × 2 = $1,600.

Next, we are told that the cost of making the alteration amounted to t=a total of $4,000

Since the cost of alteration ($4,000) is greater than the amount realized after the alteration ($1,600), there is a reduction in operating income by an amount of ; 4,000 - 1,600 = $2,400.

answer; capital structure decision;