Continental Industries is a diversified corporation with separate operating divisions Each division's performance is evaluated on the basis of profit and return on investment. The Air Comfort Division manufactures and sells air-conditioner units. The coming year's budgeted income statement, which follows, is based upon a sales volume of 20,000 units AIR COMFORT DIVISION Budgeted Income Statement (In thousands) Total Per Unit $8,380 $ 419 Sales revenue Manufacturing costs Compressor Other direct material Direct labor Variable overhead Fixed overhead $1,580 $ 79 36 37 37 26 720 740 740 520 Total manufacturing $4,300 $215 costs Gross margin $4,080 $204 Operating expenses Variable selling Fixed selling Fixed administrative $ 480 $ 24 24 37 480 740 Total operating $1,700 $ 85 expenses Net income before taxes $2,380 119 Air Comfort's division manager believes sales can be increased if the price of the air-conditioners is reduced. A market research study by an independent firm indicates that a 6 percent reduction in the selling price would increase sales volume 21 percent, or 4,200 units. The division has sufficient production capacity to manage this increased volume with no increase in fixed costs