Data concerning Golding Corporation's single product appear below:
Per Unit Percent of Sales
Selling price.................. $210 100%
Variable costs................ 126 60%
Contribution margin......... $84 40%
Fixed costs 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 operating profit of this change if fixed costs are unaffected?