Question: Birchfields management is looking at longer term solutions to improve net income. One of the options they have reviewed will increase fixed expenses by $27,500

Birchfields management is looking at longer term solutions to improve net income. One of the options they have reviewed will increase fixed expenses by $27,500 while reducing variable expenses by $2 per unit. Management feels that with these changes the price of the product could be reduced by $1 per unit. The decrease in price will then result in an increase in unit sales of 5%. Compute the net income to be earned under this alternative. Do you recommend this option? Why or why not?

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