Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 65 39 100% 60 $ 26 40% Fixed expenses are $73,000 per month and the company is selling 4,300 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,700, the monthly sales volume increases by 100 units, and the total monthly sales increase by $6,500? 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 $ 65 39 100% 60 $ 26 40% Fixed expenses are $73,000 per month and the company is selling 4,300 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,700, the monthly sales volume increases by 100 units, and the total monthly sales increase by $6,500? 1-b. Should the advertising budget be increased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rahul
![Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin.
Percent
Per Unit of Sales
$ 65
39
$ 26
100%
60
40%
Fixed expenses are $73,000 per month and the company is selling 4,300 units per month.
Required:
1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,700, the
monthly sales volume increases by 100 units, and the total monthly sales increase by $6,500?
1-b. Should the advertising budget be increased?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F24c0eb54-ddb5-4fe7-a498-e51ba4feab11%2Ff6a36e69-bc07-4fd3-9c33-3c1126c6a52a%2Fztaruub_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin.
Percent
Per Unit of Sales
$ 65
39
$ 26
100%
60
40%
Fixed expenses are $73,000 per month and the company is selling 4,300 units per month.
Required:
1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,700, the
monthly sales volume increases by 100 units, and the total monthly sales increase by $6,500?
1-b. Should the advertising budget be increased?
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