#4,5 Data for Hermann Corporation are shown below:

	Per Unit				Percent of Sales
Selling price	$	135				100	%
Variable expenses		81				60
Contribution margin	$	54				40	%

Fixed expenses are $87,000 per month and the company is selling 2,900 units per month.

1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,200 and monthly sales increase by $24,300?

1-b. Should the advertising budget be increased?

How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,200 and monthly sales increase by $24,300? (Round any unit calculations up to the nearest whole unit.)

2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $5 per unit and increase unit sales by 20%.

2-b. Should the higher-quality components be used?

How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $5 per unit and increase unit sales by 20%.

#6

Mauro Products distributes a single product, a woven basket whose selling price is $24 per unit and whose variable expense is $18 per unit. The companys monthly fixed expense is $15,000.

1. Calculate the companys break-even point in unit sales. 2. Calculate the companys break-even point in dollar sales. (Do not round intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)

#7

Lin Corporation has a single product whose selling price is $135 per unit and whose variable expense is $54 per unit. The companys monthly fixed expense is $40,400.

1. Calculate the unit sales needed to attain a target profit of $4,150. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $8,800. (Round your intermediate calculations to the nearest whole

#8

Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next months budget appear below:

Selling price per unit	$	24
Variable expense per unit	$	17
Fixed expense per month	$	5,600
Unit sales per month		950

1. What is the companys margin of safety? (Do not round intermediate calculations.) 2. What is the companys margin of safety as a percentage of its sales? (Round your percentage answer to 2 decimal places (i.e. 0.1234 should be entered as 12.34).)

#9

Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows:

	Amount			Percent of Sales
Sales	$	134,000		100	%
Variable expenses		53,600		40	%
Contribution margin		80,400		60	%
Fixed expenses		24,000
Net operating income	$	56,400

1. What is the companys degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 13% increase in sales. 3. Construct a new contribution format income statement for the company assuming a 13% increase in sales.