[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
|
Per Unit |
Percent
of Sales |
| Selling price |
$ |
85 |
|
100% |
| Variable expenses |
|
51 |
|
60% |
|
|
|
|
|
| Contribution margin |
$ |
34 |
|
40% |
|
|
|
|
Fixed expenses are $77,000 per month and the company is selling 2,600 units per month.
1) The marketing manager argues that a $8,200 increase in the monthly advertising budget would increase monthly sales by $16,000. Calculate the increase or decrease in net operating income. Also include how much it has increased/decreased by.
2) Should the advertising budget be increased?