3. Houpe Corporation produces and sells a single product. Data concerning that product appear below:

	Per Unit	Percent of Sales
Selling price	$ 140	100%
Variable expenses	42	30%
Contribution margin	$ 98	70%

Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month.

Management is considering using a new component that would increase the unit variable cost by $5. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 300 units. What should be the overall effect on the company's monthly net operating income of this change?

Multiple Choice

• decrease of $2,100
• decrease of $27,900
• increase of $27,900
• increase of $2,100