XYZ Manufacturing produces a single product that sells for $100. Variable costs per unit equal $48. The company expects total fixed costs to be $56,000 for next year at the current sales level of 3,000 units. In an attempt to improve performance, management is considering 2 alternative actions. Each alternative action is to be evaluated separately.

18. Suppose management believes that a $20,000 increase in fixed expense will result in a considerable increase in sales. If sales increase by 500 units, what will be the increase in net income?

a. $5,000

b. $5,500

c. $6,000

d. $6,500

19. Suppose management believes that a 15% reduction in the selling price will result in a 40% increase in sales. If this proposed reduction in selling price is implemented,

a. net income will decrease by $1,600.

b. net income will increase by $600.

c. net income will decrease by $600.

d. net income will increase by $1,600.