Question: Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 100 100% Variable expenses 61 61 Contribution margin $ 39

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, the monthly sales volume increases by 100 units, and the total monthly sales increase by $10,000?

1-b. Should the advertising budget be increased?

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