Data for Hermann Corporation are shown below: Fixed expenses are $79,000 per mon
ID: 2333825 • Letter: D
Question
Data for Hermann Corporation are shown below:
Fixed expenses are $79,000 per month and the company is selling 3,600 units per month.
Garrison 16e Rechecks 2017-05-02
Required:
1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,400 and monthly sales increase by $17,000?
1-b. Should the advertising budget be increased?
Req 1A
Req 1B
How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,400 and monthly sales increase by $17,000? (Do not round intermediate calculations.)
Per Unit Percent of Sales Selling price $ 95 100 % Variable expenses 57 60 Contribution margin $ 38 40 %Explanation / Answer
1.Hence decrease in Net operating income=(57800-56200)=$1600
2.Hence advertising budget should not be increased.
Current Proposed Sales (95*3600)=$342000 (342000+$17000)=$359000 Variable expenses (57*3600)=$205200 (359000*60%)=$215400 Contribution margin $136800 $143600 Fixed expenses $79000 (79000+8400)=$87400 Net operating income $57800 $56200Related Questions
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