A company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit,

Question:

A company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit, and a sales price of $85 per unit. After learning that its variable costs will increase by 20 percent, the company is considering an increase in production to 12,000 units. Which of the following statements is correct regarding the company’s next steps?
a. If production is increased to 12,000 units, profits will increase by $50,000.
b. If production is increased to 12,000 units, profits will increase by $100,000.
c. If production remains at 10,000 units, profits will decrease by $50,000.
d. If production remains at 10,000 units, profits will decrease by $100,000.