Reference no: EM132021400

Question - Peridot company's income statement for the current month shows that the company sold 400,000 unit of its product and earned a net operating income of $600,000. Facing an industry-wide downturn, management is concerned about a possible loss in the coming month. It estimates that once the sales drop from the current level by more than 25%, the company will start seeing losses. It has been suggested that if the company runs an expensive new TV commerical at a cost of $100,000 per month, sales volume next month will not decrease but will instead increase by 5% from the current sales level without the need to lower the sales price. If this action is taken, what will be the increase or decrease in next month's net operating income from the current month?

A. increase 20000

B. decrease 20000

C. increase 140000

D. decrease 140000

Show work please (step by step).