Gibson Corporation produces and sells a single product. Data concerning that product appear below:
Per Unit
Percent of Sales
Selling price
$180
100%
Variable expenses
36
20%
Contribution margin
$144
80%
Fixed expenses are $1,133,000 per month. The company is currently selling 9,000 units per month. Management is considering using a new component that would increase the unit variable cost by $7. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 500 units.
What should be the overall effect on the company's monthly net operating income of this change?
Group of answer choices
increase in $5,500
decrease of $68,500
decrease of $5,500
increase of $68,500