Houpe Corporation produces and sells a single product. Data concerning that product appear below: Per UnitPercent of SalesSelling price$140 100%Variable expenses 42 30%Contribution margin$98 70% Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. The marketing manager would like to cut the selling price by $7 and increase the advertising budget by $28,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should be the overall effect on the company's monthly net operating income of this change?
A. decrease of $24,500
B. decrease of $17,500
C. increase of $38,500
D. increase of $17,500
Answer: A
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