1. What is the change in operating income if marketing is correct and only the sales price is changed?

ACCOUNTING

Multiple Choice

Frank’s Computer Monitors, Inc., currently sells 17” monitors for $270. It has costs of $210. A competitor is bringing a new 17” monitor to market that will sell for $225. Management believes it must lower the price to $225 to compete in the market for 17” monitors. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Frank’s Computer Monitor, Inc.’s sales are currently 10,000 monitors per year.



What is the change in operating income if marketing is correct and only the sales price is changed?

a. $165,000

b. $45,000

c. $(165,000)

d. $(435,000)

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