Question
In: Accounting
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?
Data for Hermann Corporation are shown below:
| Per Unit | Percent of Sales | ||||||
| Selling price | $ | 75 | 100 | % | |||
| Variable expenses | 51 | 68 | |||||
| Contribution margin | $ | 24 | 32 | % | |||
Fixed expenses are $75,000 per month and the company is selling 4,000 units per month.
Required:
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?
Should the advertising budget be increased?
Solutions
Expert Solution
| Current | Proposed | |
| Sales | (75*4000)=300,000 | (300,000+24500)=324500 |
| Variable expenses | (51*4000)=204000 | (324500*68%)=220660 |
| Contribution margin | 96000 | 103840 |
| Fixed expenses | 75000 | (75000+9900)=84900 |
| Net operating income | 21000 | 18940 |
Hence decrease in Net operating income=(21000-18940)=$2060
Hence advertising budget should not be increased.
ekkarill92 answered 3 years agoRelated Solutions
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 SalesSelling Price
$90
100%Variable
Expenses
63
70Contribution 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...
The marketing manager argues that a $9,300 increase in the monthly advertising budget would increase monthly sales by $21,500. Calculate the increase or decrease in net operating income.
Data for Hermann Corporation are shown below:
Per Unit
Percentof Sales
Selling price
$
140
100%
Variable expenses
91
65%
Contribution margin
$
49
35%
Fixed expenses are $88,000 per month and the company is selling 3,000 units per month.
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Per...
How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $4 per unit and increase unit sales by 20%
Data for Hermann Corporation are shown below:Per UnitPercent of SalesSelling price$80100%Variable expenses4455Contribution margin$3645%Fixed expenses are $76,000 per month and the company is selling
2,500 units per month.2-a. How much will net operating income increase (decrease) per
month if the company uses higher-quality components that increase
the variable expense by $4 per unit and increase unit sales by
20%.2-b. Should the higher-quality components be used?
Based on the current sales mix, if total sales increase by $30,000 per month, by how much will the overall company’s operating income increase?
The Tigers Company sells two products
with the following data:
Product A
Sales
...............................................$100,000
Product B
$100,000
Total
$200,000
Variable
costs.................................... 70,000
55,000
125,000
Contribution
margin.........................$ 30,000
$ 45,000
$ 75,000
Contribution margin
ratio
30%
45%
37.5%
The company’s fixed expenses total
$45,000 per month.
2. Based on the current sales mix, the breakeven point for the
company as a whole is
A. $200,000
B.
$175,000
C.
$120,000
D.
$150,000
2. Based on the current sales mix, if total sales...
1. Why does WACC increase and IRR decrease as the capital budget increases? Are there any...
1. Why does WACC increase and IRR decrease as the capital budget
increases? Are there any steps management can take to reverse these
trends?
2. How should a company prioritize all of its capital project
opportunities? In responding invoke the various methodologies
learned this week and how to use them for ranking projects.
1. Why does WACC increase and IRR decrease as the capital budget increases? Are there any...
1. Why does WACC increase and IRR decrease as the capital
budget increases? Are there any steps management can take to
reverse these trends?
2. How should a company prioritize all of its capital project
opportunities? In responding invoke the various methodologies
learned this week and how to use them for ranking projects.
The contribution margin per unit increases due to: A. increase in selling price B. decrease in...
The contribution margin per unit increases due to:
A. increase in selling
price
B. decrease in selling
price
C. increase in variable costs
D. decrease in fixed
costs
(In Billion Dollars except EPS) 01/31/2017 01/31/2018 Increase/ (Decrease) % of increase / (decrease) Net income...
(In Billion Dollars except EPS)
01/31/2017
01/31/2018
Increase/ (Decrease)
% of increase / (decrease)
Net income
$
13.643
$
9.862
$
(3.781)
-27.71%
Net income before taxes
$
20.497
$
15.123
$
(5.374)
-26.22%
Income tax expenses
$
6.204
$
4.600
$
(1.604)
-25.85%
Income tax rate
30.27%
30.42%
0.15%
0.49%
Earnings per share
Basic
$
4.40
$
3.29
$
(1.11)
-25.23%
Diluted
$
4.38
$
3.28
$
(1.10)
-25.11%
Total revenue
$
485.873
$
500.343
$
14.470
2.98%
Gross...
The marketing manager argues that a $5,000 increase in the monthly budget to prepare webinars would increase monthly sales by 50 drones. Should the webinar budget be increased?
Information for Drone On Limited is shown below:
Per Unit
Percentage of Sales
Selling price
$1,000
100%
Variable expenses
800
80%
Contribution margin
$200
20%
Total fixed expenses are $100,000 per month, and Drone On Limited is selling 1,000 drones per month.
Required:
The marketing manager argues that a $5,000 increase in the monthly budget to prepare webinars would increase monthly sales by 50 drones. Should the webinar budget be increased?
Sales are expected to increase by 10% per month. January sales are expected to be 110,000...
Sales are expected to increase by 10% per month. January sales
are expected to be 110,000 units We want an ending finished goods
inventory balance each month of 10% of the current month’s sales
Each unit sells for $85 Each unit required 2 pounds of raw material
A, and 5 grams of raw material B. Raw material A costs $11 per
pound and raw material B costs $1 per gram. We want an ending raw
materials inventory of 20% of...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- What are the options that might be considered in relation to introducing flexible work practices? What...
- Question 2 : Aggregate Scores: Write a program that opens 2 files, quiz.txt, and hw.txt. The...
- Define the term symbiosis specifically as it applies in a biological context. Compare and contrast parasitism,...
- A research team conducted a study showing that approximately 20% of all businessmen who wear ties...
- Research the internet for companies that have executed data science projects. Pick one company and describe...
- Explain two theories or frameworks for understanding how Western Europe emerged out of 1,000 years of...
- Two cannons are mounted as shown in the drawing and rigged to fire simultaneously. They are...
ADVERTISEMENT