Knoll, Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per

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Question:

Knoll, Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. Knoll is considering Increasing the price of its units to $60 per unit. This will not affect costs, but demand is expected to drop 20%. Should Knoll increase the cost of its product?

No, profit will decrease $30,000.

No, profit will decrease $150,000.

Yes, profit will increase $150,000.

Yes; profit will increase $30,000.