Craylon Manufacturing Produces a Single Product That Sells for $140

Multiple Choice

Craylon Manufacturing produces a single product that sells for $140. Variable costs per unit equal $35. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,500 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. One alternative is to increase advertising expenses by $11,000. What is the effect on operating income with the increase of advertising expenses?

A) Operating income will decrease by $11,000.
B) Operating income will increase by $11,000.
C) Operating income will decrease by $86,500.
D) Operating income will increase by $86,500.