Data for Hermann Corporation are shown below:

	Per unit	Percent of Sales
Selling price	$72.00	100%
Variable expenses	36.72	51
Contribution margin	$35.28	49%

Fixed expenses are $75,500 per month and the company is selling 3,900 units per month.

Requirement 1:
(a)	Calculate the increase or decrease in net operating income if a $7,700 increase in the monthly advertising budget would increase monthly sales by $14,600.(Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

Change in Net operating income

$

(b)	Should the advertising budget be increased as suggested in requirement 1(a) above?
	yes or no

Requirement 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 17% per month. Should the higher-quality components be used?

yes or no