Smith Corporation produces and sells a single product with the following characteristics:

	Per Unit	Percent of Sales
Selling price	$170	100%
Variable expenses	102	60%
Contribution margin	$68	40%

The company is currently selling 8,000 units per month. Fixed expenses are $406,000 per month.

14. Smith Corp. is considering using a new component that would increase the unit variable cost by $3. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

A. decrease of $2,000

B. increase of $26,000

C. increase of $2,000

D. decrease of $26, 000