Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit $ 125 80 $45 Selling price Variable expenses Contribution margin Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. Percent of Sales 100% 64 36% 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? Req 1A Complete this question by entering your answers in the tabs below. Reg 1B

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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Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin
Per Unit
$ 125
80
$45
Fixed expenses are $85,000 per month and the company is selling 2,700 units per month.
Percent
of Sales
100%
64
36%
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?
Req 1A
Complete this question by entering your answers in the tabs below.
Req 1B
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 Per Unit $ 125 80 $45 Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. Percent of Sales 100% 64 36% 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? Req 1A Complete this question by entering your answers in the tabs below. Req 1B
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 $9,000,
the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,500? (Do not round
intermediate calculations.)
Net operating income
by
Red 1A
Req 1B >
Transcribed Image Text: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 $9,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,500? (Do not round intermediate calculations.) Net operating income by Red 1A Req 1B >
Expert Solution
Step 1: Introduce to Contribution Margin and net operating income

Contribution margin is the difference between contribution margin and fixed expenses. It is also calculated by multiplying contribution margin per unit by units sold. Net operating income is the difference between contribution margin and fixed expenses.

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