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Winthrop Corporation produces and sells a single product. Data for that product are: ...

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Accounting

Winthrop Corporation produces and sells a single product. Data for that product are:

Sales price per unit $255
Variable cost per unit $210
Fixed expenses for the month $630,000
Currently selling 10,500 units

Upper management is considering using a biodegradable packaging which costs $7 more per unit but it produces less waste in the long run. Management plans to increase advertising by $10,000 in the first month to advertise this new feature to their packaging. They believe that environmentally friendly people will switch to their product resulting in an increase in sales of 2,500 units per month.

What should be the overall effect on the company's monthly operating income in the first month if this change is implemented?

A.

Decrease of $11,500

B.

Increase of $31,500

C.

Increase of $11,500

D.

Decrease of $31,500

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