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Calculate the increase or decrease in net operating income

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Reference no: EM131808000

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Data for Hermann Corporation are shown below:


   Per Unit Percent
of Sales
  Selling price    $ 85
100%
  Variable expenses
51
  60%





  Contribution margin    $ 34
  40%




Fixed expenses are $77,000 per month and the company is selling 2,600 units per month.

1) The marketing manager argues that a $8,200 increase in the monthly advertising budget would increase monthly sales by $16,000. Calculate the increase or decrease in net operating income. Also include how much it has increased/decreased by.

2) Should the advertising budget be increased?

Reference no: EM131808000

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