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Question(s) / Instruction(s):

Vaccaro Corporation produces and sells a single product. Data concerning that product appear below:

                                                Per Unit               Percent of Sales

Selling Price                        $140                       100%

Variable Expenses           28                           20%

Contribution Margin       $112                       80%

Fixed expenses are $293,000 per month. The company is currently selling 3,000 units per month. Management is considering using a new component that would increase the unit variable cost by $13. Since the new component would increase the features of the company\'s product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company\'s monthly net operating income of this change?

a)            Increase of $600

b)            Increase of $39,600

c)            Decrease of $600

d)            Decrease of $39,600

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