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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:
Question 1: 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?
Question 2: Should the advertising budget be increased?
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