Data concerning Pellegren Corporation's single product appear below:
Per Unit Percent of Sales
Selling price $200 100%
Variable expenses 40 20%
Contribution margin $160 80%
Fixed expenses are $531,000 per month. The company is currently selling 4,000 units per month. The marketing manager would like to cut the selling price by $14 and increase the advertising budget by $35,000 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 $18,000
B) increase of $38,000
C) decrease of $38,000
D) increase of $58,000
