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Data for Hermann Corporation are shown below:
Per Unit Percent of Sales
Selling price $ 120 100 %
Variable expenses 78 65
Contribution margin $ 42 35 %
Fixed expenses are $84,000 per month and the company is selling 2,600 units per month.
Required:
Problem 1: How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,900, the monthly sales volume increases by 100 units, and the total monthly sales increase by $12,000?
Problem 2: Should the advertising budget be increased?
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