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Data for Hermann Corporation are shown below: Per Unitof Sales Percent Selling price Varlable expenses... . _ . . Contribution margin ....$90 63 100% 70%
Data for Hermann Corporation are shown below: Per Unitof Sales Percent Selling price Varlable expenses... . _ . . Contribution margin ....$90 63 100% 70% 30% Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Required: 1. The marketing manager argues that a $5,000 increase in the monthly advertising budget would increase monthly sales by $9,000. Should the advertising budget be increased? 2. Refer to the original data. Management is considering using higher quality components that would increase the variable expense by $2 per unit. The marketing manager believes that the higher-quality product would increase sales by 10% per month. Should the higher quality components be used
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