Capital One produces a single product, which it sells for $7.50 per unit. Variable costs per unit equal $3.00. The company expected total short-term fixed costs to be $6,770 for the coming month, at the projected sales level of 19,000 units. Management is considering several alternative actions designed to improve operating results. In conjunction with this, they have created a profit-planning model, which can be used to evaluate different scenarios.
Capital One's management believes that a 10.00% reduction in the selling price will increase sales volume by 10.00% If this plan is implemented, then:
A) Profit should increase by approximately $7,125 per month
B) Profit should increase by approximately $14,250 per month
C) Profit should decrease by approximately $14,250 per month
D) Profit should decrease by approximately $7,125 per month
E) Profit should remain approximately the same