1. Required information 1-a. The marketing manager argues that a $9,000 increase
ID: 2426456 • Letter: 1
Question
1.
Required information
1-a.
The marketing manager argues that a $9,000 increase in the monthly advertising budget would increase monthly sales by $20,000. Calculate the increase or decrease in net operating income.
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WorksheetDifficulty: 1 EasyLearning Objective: 05-04 Show the effects on net operating income of changes in variable costs, fixed costs, selling price, and volume.
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2.
Required information
2-a.
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.
Data for Hermann Corporation are shown below:Explanation / Answer
1-a.
1-b. No, the advertising budget should not be increased.
2-a.
2-b. Yes, the higher quality components should be used.
No increase in advertising budget Increase in advertising budget Sales 337,500 357,500 Contribution margin @ 36% 121,500 128,700 Less fixed costs 85,000 94,000 Net operating income 36,500 34,700Related Questions
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