Question - Data for Hermann Corporation are below:
Selling price - $75 per unit, 100% percent of sales
Variable expenses - $51 per unit, 68% percent of sales
Contribution margin - $24 per unit, 32% percent of sales
Fixed expenses are $75,000 per month and the company is selling 4,000 units per month.
The marketing manager argues that a $9.900 increase in the monthly advertising budget would increase monthly sales by $24,500. Calculate the increase or decrease in net operating income.
Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $4 per unit. The marketing manager believes that the higher-quality product would increase sales by 25% per month. Calculate the change in total contribution margin.