Data for Herron Corporation are shown below:

Fixed expenses are $75,000 per month and the company is selling 3,000 units per month.

Required:
1. The marketing manager argues that an $8,000 increase in the monthly advertising budget would increase monthly sales by $15,000. Should the advertising budget be increased?
2. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $3 per unit. The marketing manager believes the higher-quality product would increase sales by 15% per month. Should the higher-quality components beused?

Transcribed Image Text:

Percent Per Unit of Sales $75 45 100% 60% Seling price.... Variable expenses.. Contribution margin $30 40%