Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Per Unit Sales $ 125 Selling price Variable expenses 100% 64 80 Contribution margin $ 45 36% Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,500? 1-b. Should the advertising budget be increased?
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Per Unit Sales $ 125 Selling price Variable expenses 100% 64 80 Contribution margin $ 45 36% Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,500? 1-b. Should the advertising budget be increased?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
![### Required Information
[The following information applies to the questions displayed below.]
#### Data for Hermann Corporation
<table>
<tr>
<th></th>
<th>Per Unit</th>
<th>Percent of Sales</th>
</tr>
<tr>
<td>Selling Price</td>
<td>$125</td>
<td>100%</td>
</tr>
<tr>
<td>Variable Expenses</td>
<td>$80</td>
<td>64%</td>
</tr>
<tr>
<td>Contribution Margin</td>
<td>$45</td>
<td>36%</td>
</tr>
</table>
Fixed expenses are $85,000 per month and the company is selling 2,700 units per month.
### Required:
#### 1-a.
How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,500?
#### 1-b.
Should the advertising budget be increased?
### Instructions
Complete this question by entering your answers in the tabs below.
- **Requirement 1A**:
- Enter how much net operating income will increase (decrease) per month.
- Consider the increased advertising budget of $9,000, the increase in monthly sales volume by 100 units, and the total monthly sales increase by $12,500.
- Note: Do not round intermediate calculations.
- **Requirement 1B**:
- Determine whether the advertising budget should be increased.
#### Interface for Answer Input:
- Net operating income [Text Box] by [Text Box]
- Navigation buttons: `Req 1A` and `Req 1B`](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffb04437b-3f7e-4496-ba03-3a7f713d70b1%2Fdb08dc70-cb70-47f3-bd90-6af3ac28ec52%2Fzoftnro_processed.png&w=3840&q=75)
Transcribed Image Text:### Required Information
[The following information applies to the questions displayed below.]
#### Data for Hermann Corporation
<table>
<tr>
<th></th>
<th>Per Unit</th>
<th>Percent of Sales</th>
</tr>
<tr>
<td>Selling Price</td>
<td>$125</td>
<td>100%</td>
</tr>
<tr>
<td>Variable Expenses</td>
<td>$80</td>
<td>64%</td>
</tr>
<tr>
<td>Contribution Margin</td>
<td>$45</td>
<td>36%</td>
</tr>
</table>
Fixed expenses are $85,000 per month and the company is selling 2,700 units per month.
### Required:
#### 1-a.
How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,500?
#### 1-b.
Should the advertising budget be increased?
### Instructions
Complete this question by entering your answers in the tabs below.
- **Requirement 1A**:
- Enter how much net operating income will increase (decrease) per month.
- Consider the increased advertising budget of $9,000, the increase in monthly sales volume by 100 units, and the total monthly sales increase by $12,500.
- Note: Do not round intermediate calculations.
- **Requirement 1B**:
- Determine whether the advertising budget should be increased.
#### Interface for Answer Input:
- Net operating income [Text Box] by [Text Box]
- Navigation buttons: `Req 1A` and `Req 1B`
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