1. To increase operating income, the company is considering the following two alternatives:
   1. Reduce the selling price by an average of $2.00 per gallon. This action is expected to increase the number of gallons sold by 22 percent. (Under this plan, the manager would be paid their salary without a bonus.)
   2. Spend $3,200 per month on advertising without any change in selling price. This action is expected to increase the number of gallons sold by 9 percent. (Under this plan, the manager would be paid their salary without a bonus).

Purple Cow operates a chain of drive-ins selling primarily ice cream products. The following information is taken from the records of a typical drive-in now operated by the company.

Average selling price of ice cream per gallon		$15.20
Number of gallons sold per month		3,200
Variable costs per gallon:
Ice cream	$4.55
Supplies (cups, cones, toppings, etc)	2.25
Total variable expenses per gallon		$6.80
Fixed costs per month:
Rent on building		$2,100.00
Utilities and upkeep		848.00
Wages, including payroll taxes		4,770.00
Managers salary, including payroll taxes but excluding any bonus		2,400.00
Other fixed expenses		1,600.00
Total fixed costs per month		$11,718.00