C. Assume the area of the plant in which W is manufactured can easily be adapted to the production of Z, but changes in quantities produced necessitate changes in selling prices. Compute the total effect on operating income if production of W is reduced to 500 units (to be sold at $12 each) and production of Z is increased to 2,500 units (to be sold at $10.50 each)

3. (CPA) Bradshaw Manufacturing Company is reviewing the profitability of the company's four products and the potential of several proposals for improving the profitability of the product mix. An income statement and other data follow: Product Product Product Product Total W X Y Z $62,600 44,274 18,326 12.012 S6,314 $10,000 4,750 5,250 1,990 3,260 $18,000 7,056 10,944 2.976 7,968 $12,600 13.968 (1,368) 2,826 S(4,194) $22,000 18.500 3,500 4,220 S (720) Revenues Cost of goods sold Gross margin Operating costs Operating income 1,800 7.00 Units sold 1,000 1,200 $ 15.00 2,000 11.00 Selling price Variable cost of goods sold per unit Variable operating cost per unit 10.00 $ 2.50 $ 3.00 $ 6.50 $ 6.00 $ 1.00 $ 1.20 $ 1.25 1.17 Each of the following proposals is to be considered independently. Consider only the product changes stated in each proposal; the production and sales levels of the other products remain the same