Last month when Holiday Creations, Inc., sold 38,000 units, total sales were $308,000, total variable expenses were $224,840, and fixed expenses were $36,100.

Required:

1. What is the companys contribution margin (CM) ratio?

2. What is the estimated change in the companys net operating income if it can increase total sales by $1,400? (Do not round intermediate calculations.)

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Required information

[The following information applies to the questions displayed below.]

Data for Hermann Corporation are shown below:

	Per Unit				Percent of Sales
Selling price	$	115				100	%
Variable expenses		69				60
Contribution margin	$	46				40	%

Fixed expenses are $83,000 per month and the company is selling 2,500 units per month.

Garrison 16e Rechecks 2017-05-02

Required:

1-a. The marketing manager argues that a $8,800 increase in the monthly advertising budget would increase monthly sales by $19,000. Calculate the increase or decrease in net operating income.

1-b. Should the advertising budget be increased?