Answer:
Income will decrease by $36,000.
Explanation:
Giving the following information:
New selling price= 200*0.8= $160
New sales in units= 2,000*1.2= 2,400 units
Variable cost per unit= $50
Fixed costs= $120,000
First, we determine the current operating income:
Current income= 2,000*(200 - 50) - 120,000
Current income= $180,000
Now, the new income:
New operating income= 2,400*(160 - 50) - 120,000
New operating income= $144,000
Income will decrease by $36,000.