Billings Company Has Developed the Following Budgeted Income Statement The Company Is Experimenting with New Engineering Techniques and Believes

Multiple Choice

Billings Company has developed the following budgeted income statement: $\begin{array}{lrr} \text {Sales Revenue \( (2,300 \) units \( \times \$ 14 \) sales price) } &\$32,200\\ \text { Total Variable Expenses (2,300 \( \$ 6 \) per unit) } &\underline{(13,800) }\\ \text { Contribution Margin} &18,400\\ \text {Fixed Expenses } &\underline{(10,000) }\\ \text {Net Income } &\underline{\$8,400}\\\end{array}$

The Company is experimenting with new engineering techniques and believes it can reduce variable cost to $4.50 per unit and significantly improve the product.The innovations would double fixed costs but the company expects to be able to increase sales to 3,500 units.If this strategy is pursued the company's budgeted net income will:

A) decrease by $4,250.
B) increase by $4,850.
C) increase by $13,250.
D) decrease by $4,150.