Required information

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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.

Garrison 16e Rechecks 2017-05-02

Required:

1-a. The marketing manager argues that a $8,300 increase in the monthly advertising budget would increase monthly sales by $16,500. Calculate the increase or decrease in net operating income.

1-b. Should the advertising budget be increased?