The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 90 100 % Variable expenses 63 70 Contribution margin $ 27 30 % Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthly sales increase by $9,000? 1-b. Should the advertising budget be increased?
The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 90 100 % Variable expenses 63 70 Contribution margin $ 27 30 % Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthly sales increase by $9,000? 1-b. Should the advertising budget be increased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
| Per Unit | Percent of Sales |
||||
| Selling price | $ | 90 | 100 | % | |
| Variable expenses | 63 | 70 | |||
| Contribution margin | $ | 27 | 30 | % | |
Fixed expenses are $30,000 per month and the company is selling 2,000 units per month.
Required:
1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthly sales increase by $9,000?
1-b. Should the advertising budget be increased?
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