Data for Hermann Corporation are shown below:

	Per Unit	Percent of Sales
Selling price	$ 90	100%
Variable expenses	63	70
Contribution margin	$ 27	30%

Fixed expenses are $78,000 per month and the company is selling 3,500 units per month.

Required:

1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,300, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000?

1-b. Should the advertising budget be increased?

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 $4 per unit and increase unit sales by 20%.

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