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

Data for Hermann Corporation are shown below:

	Per Unit				Percent of Sales
Selling price	$	120				100	%
Variable expenses		78				65
Contribution margin	$	42				35	%

Fixed expenses are $84,000 per month and the company is selling 2,600 units per month.

Required:

1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,900, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,000?

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 $5 per unit and increase unit sales by 20%.

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