Billings Company has developed the following budgeted income statement: Sales revenue (2,300 units × $14 sales price)$32,200 Total Variable cost (2,300 × $6 per unit) (13,800) Contribution margin$18,400 Fixed cost (10,000) Net income$8,400 The Company is experimenting with new engineering techniques and believes it can reduce variable cost to $4.50 per unit and significantly improve the product. The innovations would double fixed costs but the company expects to be able to increase sales to 3,500 units. If this strategy is pursued the company's budgeted net income will:
A. increase by $13,250.
B. increase by $4,850.
C. decrease by $4,150.
D. decrease by $4,250.
Answer: B
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