Dog Dandy distributes a dog collar made of wooden beads that sells for $40 per unit. Variable expenses are $20 per unit, and fixed expenses total $153,600 per year. Its operating results for last year were as follows:
Sales$512,000
Variable expenses 256,000
Contribution margin 256,000
Fixed expenses 153,600
Operating income$102,400.
The sales manager is convinced that a 10% reduction in the selling price, combined with a $22,800 increase in advertising, would increase this year’s unit sales by 40%. If the sales manager is right, what would be this year’s operating income if his ideas are implemented?