Data for Hermann Corporation are shown below: Per Unit Pe

Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $75 100% Variable expenses $51 68% Contribution margin $24 32% Fixed expenses are $75000 per month and the company is selling 4000 units per month. The marketing manager argues that a $9900 increase in the monthly advertising budget would increase monthly sales by $24500. Calculate the increase or decrease in net operating income. a. Net operating income increase or decreased by what percentage b. Should the advertising budget be increased? Yes No Question 2 Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $4 per unit. The marketing manager believes that the higher-quality product would increase sales by 25% per month. Calculate the change in total contribution margin. a. Total contribution margin increased or decreased by what percentage b. Should the higher-quality components be used? Yes No

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