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?

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.

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?

2. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher- quality components that increase the variable expense by $2 per unit and increase unit sales by 10%.

Expert Solution

ekkarill92 answered 2 years ago

How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,900 and monthly sales increase by $24,500?

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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?

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How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,900 and monthly sales increase by $24,500?

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