Reference no: EM132945352

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?