Question: Data concerning Runnells Corporation's single product appear below: Per Unit Percent of Sales Selling price .............. $160...... 100% Variable expense......... $80 ....... 50% Contribution margin

Data concerning Runnells Corporation's single product appear below:
Per Unit Percent of Sales
Selling price .............. $160...... 100%
Variable expense......... $80 ....... 50%
Contribution margin ...... $80 ....... 50%
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?
a. Increase of $8,000
b. Increase of $1,000
c. Decrease of $7,000
d. Decrease of $1,000

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