Sign In Sign Up Ask an AI advisor
cordobamariana07
cordobamariana07
17.03.2020 • 
Business

Data for Hermann Corporation are shown below:Per unit Percent of SalesSelling 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.Requirement 1:(a) Calculate the increase or decrease in net operating income if a $5,000 increase in the monthly advertising budget would increase monthly sales by $9,000.(b) Should the advertising budget be increased as suggested in requirement 1(a) above?Requirement 2:Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $2 per unit. The marketing manager believes the higher-quality product would increase sales by 10% per month. Should the higher-quality components be used?

Solved
Show answers

Ask an AI advisor a question

I want advice