A company produces 1,000 packages of chicken feed per month. The sales price is $4.00 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,700 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will increase from $1.50 to $1.90 per unit, and fixed costs will increase by 20%. The company will price the new product at $5 per pack. How will this affect operating income? A. Operating income will decrease by $1,240 per month. B. Operating income will decrease by $260 per month. C. Operating income will increase by $260 per month. D. Operating income will remain unchanged.

A company predicts its production and sales will be 24,000 units. At that level of activity, its fixed costs are budgeted at $300,000, and its variable costs are budgeted at $246,000. If its activity level declines to 20,000 units, what will be its fixed costs and its variable costs?

A.

Fixed, $250,000; variable, $246,000

B.

Fixed, $300,000; variable, $205,000

C.

Fixed, $300,000; variable, $246,000

D.

Fixed, $250,000; variable, $205,000