Technology of the Past (TOP) produces old-fashioned simple corkscrews. Last year was not a good year for sales but TOP expects the market to pick up this year. Last year's income statement showed

Sales revenues ($4 per corkscrew)....$40,000

Variable cost ($3 per corkscrew).... 30,000

Contribution margin.......... 10,000

Fixed cost.............. 6,000

Operating income.......... $ 4,000

To take advantage of the anticipated growth in the market, TOP is considering various courses of action:

1. Do nothing. If TOP does nothing, it expects sales to increase by 10%.

2. Spend $2,000 on a new advertising campaign that is expected to increase sales by 50%.

3. Raise the price of the corkscrew to $5. This is expected to decrease sales quantities by 20%.

4. Redesign the classic corkscrew and increase the selling price to $6 while increasing the variable costs by $1 per unit. The sales level is not expected to change from last year.

REQUIRED

Evaluate each of the alternatives considered by TOP. What should TOP do?