The following information applies to the questions displayed below. Data for Her

Question

The following information applies to the questions displayed below. Data for Hermann Corporation are shown below Percent of Sales 100% 60% 40% Per Unit Selling price Variable expenses $ 65 39 $ 26 Contribution margin Fixed expenses are $73,000 per month and the company is selling 4,300 units per month value Required information 10.00 points Required 1-a. The marketing manager argues that a $9,700 increase in the monthly advertising budget would increase monthly sales by $23,500. Calculate the increase or decrease in net operating income. et operat

Explanation / Answer

1a) Increase in net income = 23500*40%-9700 = -300

Net operating income decrease by -300

2a) Change in total contribution margin = (4300*25%)*21 = $22575

Total contribution margin increase by $22575

2b) Yes, high quality components should be used

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