Data concerning Dorazio Corporation's single product appear below:
Per Unit Percent of Sales
Selling price................................... $160 100%
Variable expenses.......................... 48 30%
Contribution margin...................... $112 70%
Fixed expenses are $87,000 per month. The company is currently selling 1,000 units per month. Management is considering using a new component that would increase the unit variable cost by $28. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?
A) increase of $5,600
B) increase of $33,600
C) decrease of $5,600
D) decrease of $33,600
