Problem:
Hildes Dairy is considering adding a new line to their already profitable business. Market research indicates that sales revenue for the new line would be $30,000 for 25,000 units. Variable costs for the new product would be $0.85 per unit. Additional direct (avoidable) fixed costs would total $5000 and indirect fixed costs allocated from unavoidable costs currently in place would total $6250. If Hildes added the new line, its net income would
a) increase by 3750
b) increase by 8750
c) decrease by 2500
d) decrease by 3250
e) none of the above