Data for Hermann Corporation are shown below:

	Per Unit			Percent of Sales
Selling price	$	85		100%
Variable expenses		51		60%
Contribution margin	$	34		40%

Fixed expenses are $77,000 per month and the company is selling 2,600 units per month

1. The marketing manager argues that a $8,200 increase in the monthly advertising budget would increase monthly sales by $16,000. Calculate the increase or decrease in net operating I income.

2. Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $5 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin.