Birchfield's management is looking at longer term solutions to improve net income.

Birchfield's management is looking at longer term solutions to improve net income.

One of the

options they have reviewed will increase fixed expenses by $27,500 while reducing variable

expenses by $2 per unit.

Management feels that with these changes the price of the product

could be reduced by $1 per unit.

The decrease in price will then result in an increase in unit sales

of 5%.

Compute the net income to be earned under this alternative by using Contribution Margin

Income Statement.

Do you recommend this option?

Why or why not?