The following question is a Cost Volume Profit sensitivity analysis.In this question you will calculate and compare operating income under 3 alternatives and selecting the best alternative for the Company:

During 2020, the company was to sell their high-end kayak for $1,200 each.The company was able to sell 250 kayaks.Variable costs per unit included

purchasing costs of $700 and a marketing cost of $75 per unit.Fixed costs included marketing costs of $15,000 and rent of $36,000.

In planning for the upcoming 2021 operating year, the Company is looking at 3 alternatives (each alternative is independent of each other)

A.Increase selling prices by $150.The number of units sold is expected to decrease by 100 units.All variable and fixed costs would remain unchanged.

B.New advertising campaign that would increase variable marketing costs by 4% and increased fixed marketing costs by 5%.The company estimates that unit sales would increase by 10%.

C.Processing system changes that will result in a 3% increase in all variable costs and a 1% decrease in all fixed costs.