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Data for Hermann Corporation are shown below: Per Unit Percent of Sales $90 100% Selling price Variable expenses 63 Contribution margin $27 Fixed expenses are $78,000 per month and the company is selling 3,500 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,300, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000? 1-b. Should the advertising budget be increased? 70 30%

Data for Hermann Corporation are shown below: Per Unit Percent of Sales $90 100% Selling price Variable expenses 63 Contribution margin $27 Fixed expenses are $78,000 per month and the company is selling 3,500 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,300, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000? 1-b. Should the advertising budget be increased? 70 30%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Data for Hermann Corporation are shown below: Per Unit Percent of Sales $90 100% Selling price Variable expenses 63 Contribution margin $27 Fixed expenses are $78,000 per month and the company is selling 3,500 units per month. 70 30% Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,300, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000? 1-b. Should the advertising budget be increased?
Transcribed Image Text:Data for Hermann Corporation are shown below: Per Unit Percent of Sales $90 100% Selling price Variable expenses 63 Contribution margin $27 Fixed expenses are $78,000 per month and the company is selling 3,500 units per month. 70 30% Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,300, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000? 1-b. Should the advertising budget be increased?
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