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Columbia, Inc. provides golf course design consulting. Its current consulting rate is $ 1 7 5 per hour. Variable costs are estimated at $ 9

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.

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