Ovation Company has a single product called a Bit. The company normally produces and sells 62,400 Bits each year at a selling price of $46 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $10.80 7.20 3.30 4.50 ($280, 800 total) 6.30 2.40 ($149, 760 total) $34.50 A number of questions relating to the production and sale of Bits follow. Each question is independent. Required: 1. Assume that Ovation Company has sufficient capacity to produce 93,600 Bits each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the current 62,400 units each year if it were willing to increase the fixed selling expenses by $102,000. a. Calculate the incremental net operating income. Incremental operating income b. Would the increased fixed selling expenses be justified? Yes No