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Problem - 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 -
a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000?
b. Should the advertising budget be increased?
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