Answer:
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.
