Question - A manufacturing company reports the following operating results for the month:
Sales: $500,000 (units 5,000)
Variable costs: $300,000 ($60 per unit)
Fixed costs: $180,000
Management believes they can improve profits by increasing the sales price per unit by 10% even though this would result in a 10% decrease in the number of units sold.
What would be the effect on net income if management makes this change?
- Net income would increase by $50000.
- Net income would increase by $25,000.
- Net income would decrease by $35,000.
- Net income would decrease by $2,000.