Anderson Company Manufactures a Variety of Toys and Games

Anderson Company manufactures a variety of toys and games.John Boone, president, is disappointed in the sales of a new board game.The game sold only 10,000 units in 2011 when 30,000 were projected.Sales for 2012 look no better.At $100 per game, it is not a hot seller.Direct costs of the board game are $56 variable cost and $100,000 fixed.John is considering several options.Option One: Cut the price to $70 and perhaps sell 15,000 units.Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000.Anticipated volume for this option is 10,000 units.Option Three: Cut the price to $80 and include a $10 mail-in rebate offer.It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed.
- What is the profit (loss) from Option Two?

A) $600,000
B) $100,000
C) $40,000
D) ($100,000)