Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 120 78 100% 65 $ 42 35% Fixed expenses are $84,000 per month and the company is selling 2,600 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,900, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,000? 1-b. Should the advertising budget be increased?
Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 120 78 100% 65 $ 42 35% Fixed expenses are $84,000 per month and the company is selling 2,600 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,900, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,000? 1-b. Should the advertising budget be increased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin
Percent
Per Unit of Sales
$ 120
$ 120
78
100%
65
$ 42
35%
Fixed expenses are $84,000 per month and the company is selling 2,600 units per month.
Required:
1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,900, the
monthly sales volume increases by 100 units, and the total monthly sales increase by $12,000?
1-b. Should the advertising budget be increased?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,900,
the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,000? (Do not round
intermediate calculations.)
+
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