1-a. The marketing manager argues that a $8,800 increase in the monthly advertis
ID: 3178541 • Letter: 1
Question
1-a.
The marketing manager argues that a $8,800 increase in the monthly advertising budget would increase monthly sales by $19,000. Calculate the increase or decrease in net operating income.
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 15% per month. Calculate the change in total contribution margin.
Data for Hermann Corporation are shown below:Explanation / Answer
1-a)
Change in Net Operating Income = Change in sales - Change in variable expense = 19,000 - 8,800 = 10,200
1-b)
Yes.
2-a)
Sales = 115* 1.15 = 132.25
Variable expenses = 69+5 = 74
Contribution = 58.25 ; 44%
2-b) Yes, Since the contribution is incresing when compared to earlier i.e. 46
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