Data concerning Runnells Corporation's single product appear below:

The company is currently selling 6,000 units per month. Fixed expenses are $424,000 per month. The marketing manager believes that a $7,000 increase in the monthly advertising budget would result in a 100 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Answer

a.

Increase of $8,000

b.

Increase of $1,000

c.

Decrease of $7,000

d.

Decrease of $1,000