Houpe Corporation Produces and Sells a Single Product

Multiple Choice

Houpe Corporation produces and sells a single product. Data concerning that product appear below: 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 $17,500
B) increase of $17,500
C) decrease of $24,500
D) increase of $38,500