The Derby Shoe Company produces its famous shoe, the Divine Loafer, which sells for $70 per pair. Operating income for 2012 is as follows:

Derby Shoe COmpany would like to increase its profitabiltiy over the next year by at least 25%. To do so, the company is considering the following options:

1. Replace a portion of its variable labor with an automated machining process. This would result in a 15% decrease in variable cost per unit, but a 10% increase in fixed costs. Sales would remain the same.

2. Spend $20,000 on a new advertising campaign, which would increase sales by 40%