Answer:
The income will decrease by $21,000
Explanation:
Giving the following information:
Selling price $ 220
Variable expenses 44
Contribution margin $ 176
Sales in units= 7,000
Total contribution margin= 7,000*176= $1,232,000
Fixed expenses= ($901,000)
Net operating income= 331,000
Now, with the changes we calculate the new net operating income:
New sales price= $202
New fixed cost= (53,000 + 901,000)= 954,000
New unit sales= 8,000
Net operating income= 8,000*(202 - 44) - 954,000= $310,000
The income will decrease by $21,000
