Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 125 100 % Variable expenses 80 64 Contribution margin $ 45 36 % Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765, 07_14_2020_QC_CS-216765 Exercise 6-5 Part 1 Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000 and monthly sales increase by $20,000? 1-b. Should the advertising budget be increased?
Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 125 100 % Variable expenses 80 64 Contribution margin $ 45 36 % Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765, 07_14_2020_QC_CS-216765 Exercise 6-5 Part 1 Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000 and monthly sales increase by $20,000? 1-b. Should the advertising budget be increased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 6-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO6-4]
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Data for Hermann Corporation are shown below:
| Per Unit | Percent of Sales | ||||||
| Selling price | $ | 125 | 100 | % | |||
| Variable expenses | 80 | 64 | |||||
| Contribution margin | $ | 45 | 36 | % | |||
Fixed expenses are $85,000 per month and the company is selling 2,700 units per month.
rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765, 07_14_2020_QC_CS-216765
Exercise 6-5 Part 1
Required:
1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000 and monthly sales increase by $20,000?
1-b. Should the advertising budget be increased?
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