Columbia, Inc. provides golf course design consulting. Its current consulting rate is $$175$ per hour. Variable costs are estimated at $$96$ per hour, and total fixed costs are expected to be $$2,000,000.$ Annual sales volume is projected to be $40,000$ hours. Due to the growth of an aggressive competitor, Columbia management is considering lowering its prices by $5\%,$ which would enable the company to maintain its current sales volume. If Columbia leaves its prices at the current rate, it can expect its sales volume to drop by $7\%.$ Which choice is the better alternative and why?

$$ Allow its sales volume to decline by $7\%$ because it results in a smaller net income change than if the company lowers its consulting rate by $5\%.$

$$ Lower its current consulting rate by $5\%$ because it results in a smaller net income change than if the company allows the volume to decline by $7\%.$

$$ Lower its current consulting rate by $5\%$ because a $5\%$ change is smaller than a $7\%$ change.

$$ Maintain its price and sales volume because Columbia is a price leader.