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BlockBanter Music currently sells radios for $380. It has costs of $320. A competitor is bringing...

BlockBanter Music currently sells radios for $380. It has costs of $320. A competitor is bringing a new radio to market that will sell for $360. Management believes it must lower the price to $360 to compete in the market for radios. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. BlockBanter Music sales are currently 150,000 radios per year.

Required:

Calculate the change in operating income if marketing is correct and the sales price is changed. Clearly indicate whether the change is an increase or a decrease. Show all workings.

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