Required information Exercise 5-5 Changes in Variable Costs, Fixed Costs, Sellin

Question

Required information Exercise 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO5-4) [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: 100% Selling price Variable expenses Contribution s 80 44 s 36 Fixed expenses are $76,000 per month and the company is selling 2,500 units per month. Exercise 5-5 Part1 Required -a. The marketing manager argues that a $8,100 increase in the monthly advertising budget would increase monthly sales by $15,500 Calculate the increase or decrease in net operating income. 1-b. Should the advertising budget be increased? Complete this question by entering your answers in the tabs below Req 1A Req 18 The marketing manager argues that a $8,100 increase in the monthly advertising budget would increase monthly sales by $15,500. Calculate the increase or decrease in net operating income. (Do not round intermediate calculations.)

Explanation / Answer

a Decrease in operating income=(15500*45%)-8100= $1125 Net operating income decreases by $1125 b No

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