Question: Chapter 6 Question 2: Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 100 100 % Variable expenses 61

Chapter 6 Question 2:

Data for Hermann Corporation are shown below:

	Per Unit		Percent of Sales
Selling price	$	100		100	%
Variable expenses		61		61
Contribution margin	$	39		39	%

Fixed expenses are $80,000 per month and the company is selling 3,700 units per month.

Required:

1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,500 and monthly sales increase by $17,500?

1-b. Should the advertising budget be increased?

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