The following Contribution Format Income Statement for Jones Co. pertains to questions 6 and 7:

Sales $160,000

Variable Costs 120,000

Contribution Margin 40,000

Fixed Costs 25,000

Net Income $ 15,000

6. The president of Jones Co. believes that a 10% reduction in the selling price would increase sales volume by 50%. If both of these changes occur, what would be the effect on Jones net income?

a. net income would increase by $4,000.

b. net income would increase by $71,000.

c. net income would decrease by $4,000.

d. net income would decrease by $71,000.

7. Refer to the original Income Statement above. What must Jones sales be to break even (in dollars)?

a. $135,000

b. $110,000

c. $100,000

d. $145,000