Question: Data concerning Goulbourne Corporation's single product appear below: Per Unit Percent of Sales Selling price----------------------------------- $210 100% Variable expenses----------------------------------------------------------------126 60% Contribution margin----------------------------------------------------------- $84 40% Fixed

Data concerning Goulbourne Corporation's single product appear below:

Per Unit Percent of Sales Selling price----------------------------------- $210 100%

Variable expenses----------------------------------------------------------------126 60%

Contribution margin----------------------------------------------------------- $84 40%

Fixed expenses are $444,000 per month. The company is currently selling 7,000 units per month.

Required:

Management is considering using a new component that would increase the unit variable cost by $2. Since the new component would improve the company's product, the marketing manager predicts that monthly sales would increase by 200 units. What should be the overall effect on the company's monthly net operating income of this change if fixed expenses are unaffected? Show your work!

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