Hammer Company Expects the Following Results for the Next Accounting

Multiple Choice

Hammer Company expects the following results for the next accounting period: $\begin{array}{lr}\text { Sales } & \$ 240,000 \\\text { Variable costs } & \$ 135,000 \\\text { Fixed costs } & \$ 40,000 \\\text { Expected production and sales in units } & 3,000\end{array}$ The sales manager believes sales could be increased by 400 units if advertising expenditures are increased by $10,000. Suppose advertising expenditures are increased and sales increase by 400 units. What will be the effect on operating income?

A) a decrease of $4,000
B) an increase of $4,000
C) an increase of $22,000
D) an increase of $30,000