Question
Required information Skip to question [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of
Required information Skip to question [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales
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.
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?
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.
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?
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