A retailer uses flexible budgeting as a planning tool. The companys original budget for the upcoming year is shown below.

Sales	$90,000,000
Cost of goods sold	36,000,000
Administrative expenses (all fixed)	21,000,000
Advertising expense	9,000,000
Sales commissions	6,750,000
Other marketing expenses (all fixed)	9,250,000
Operating income	$ 8,000,000

The manager of the retailers Marketing Department believes sales volume will increase by 10% if the advertising budget is increased by $5,000,000. Should the retailer approve the increased advertising request?

A.

Yes, because the increase in sales is $4,000,000 greater than the increase in advertising costs.

B.

No, because advertising is 10% of sales, so the maximum increase in sales would be $900,000.

C.

Yes, because operating income would increase by $400,000.

D.

No, because operating income would decrease by $275,000.