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 $30.The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500 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 10% reduction in the selling price will result in a 10% increase in sales.If this proposed reduction in selling price is implemented ________.

A) operating income will decrease by $9,500
B) operating income will increase by $10,000
C) operating income will decrease by $6,000
D) operating income will increase by $11,300