Question
[The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 85
[The following information applies to the questions displayed below.] |
Data for Hermann Corporation are shown below: |
Per Unit | Percent of Sales | |||
Selling price | $ | 85 | 100% | |
Variable expenses | 51 | 60% | ||
Contribution margin | $ | 34 | 40% | |
Fixed expenses are $77,000 per month and the company is selling 2,600 units per month. |
2.
value: 1.66 points
Required information
Required: | |
a. | The marketing manager argues that a $8,200 increase in the monthly advertising budget would increase monthly sales by $16,000. Calculate the increase or decrease in net operating income. |
Net Operating Income decreases by ________________.
b. | Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $5 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin. |
Total contribution margin increases by _______________. |
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