Hogyoku Tamukeyama owns and operates a successful dry cleaning business in Bangor, Maine. Summary financial data for a typical month of operations are as follows:

Because it is the end of winter, Hogyoku is considering running a special promotion on parkas, comforters, and other winter items. During the month-long promotion Hogyoku plans to reduce the charge for cleaning each of these bulky winter items from $9 to $6. Hogyoku plans to spend $1,000 advertising the promotion in various print media, and she expects the promotion to increase the coming month’s sales by 1,500 winter items. Hogyoku’s average monthly revenue on winter items during a typical month amounts to $4,500.

Required:
By how much will Hogyoku’s profit increase or decrease in the coming month if she runs thepromotion?

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Revenue Variable costs (40% of revenue) Contribution margin Fixed costs Profit $30,000 12.00 $18,000 10,000 $8,000