Question: Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 90 100% Variable expenses 63 70 Contribution margin $ 27

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.

Exercise 6-5 (Static) Part 1

Required:

1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000?

1-b. Should the advertising budget be increased?

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