Answer the remaining problems. Data for Herron Corporation are shown below: Find

Question

Answer the remaining problems.

Data for Herron Corporation are shown below: Find expenses are $47,100 per month and the company is selling 3,800 units per month. Award: 0.455 points Required The marketing manager believes that an $8,00 increase in the monthly advertising budget would increase monthly sales by $16,200. Calculate the increase or decrease in net operating income.(input the amount as a positive value. Omit the "$" sign in your response.) Should the advertising budget be increased ? Management is considering using higher-quality components that would increase the variable cost by $5 per unit. The marketing manager believes that the higher=quality product would increase sales by 18% per month. Calculate the change in total contribution margin.(Input the amount as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Should the higher-quality components be used ?

Explanation / Answer

1a) contribution margin is 20% hence an increase in sales of 16200 will give 3,240 in contribution margin and hence the net operating income decreases by 8000 - 3240 = 4760

1b) No

2a) Old contribution margin is 3800 * 10 = 38000

New contribution margin is 3800 * 1.18 * 5 = 22420

So Total Contribution margin decreases by 38000 - 22420 = 15,580

2b) No

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