Tony Manufacturing Produces a Single Product That Sells for $80

Multiple Choice

Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $50. The company expects total fixed costs to be $82,000 for the next month at the projected sales level of 2,800 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose that management believes that a 14% reduction in the selling price will result in a 14% increase in sales. If this proposed reduction in selling price is implemented ________.

A) operating income will decrease by $23,990
B) operating income will increase by $7,370
C) operating income will decrease by $31,360
D) operating income will increase by $23,990