Data for Hermann Corporation are shown below:
Precent
Per unit of sales
selling price $ 55 100%
Variable expenses 33 60%
_____________________________
Contribution margin $ 33 40%
Fixed expenses are $71,000 per month and the company is selling 4,100 units per month.
required:
1-a. the marketing manager argues that a $9,500 increase in the monthly advertising budget would increase monthly sales by $22,500. Calculate the increase or decrease in net operating income.
Net operating income ______________ by _________________-
1-b. Should the advertising budget be increased?
2-a. Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by 44 per unit. The marketing manager believes that the higher-quality roduct would increase sales by 25% per month. Calculate the change in total contributin margin.
Total contribution margin __________ by ________.
2-b. should the higher-quality components be used? yes_______ No______.