Data for Hermann Corporation are shown below: Per Unit Sales price

Per Unit Percentage of Sales

Sales price 90 100

Less: Variable expenses 63 70

Contribution margin 27 30

Fixed expenses are $40,000 per month, and the company is selling 2,000 units per month. Required:

1. The marketing manager argues that a $4,000 increase in the monthly advertising budget would increase monthly sales by $9,000. Should the advertising budget be increased?

2. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $2.00 per unit. The marketing manager believes the higher-quality product would increase sales by 10% per month. Should the higher-quality components be used?

2)Mauro Products has a single product, a woven basket whose selling price is $54, and variable cost is $45 per unit. The company's monthly fixed expenses are $26,550.

Required:

1. Compute the company's break-even point in unit sales using the equation method. 2. Compute the company's break-even point in sales dollars using the equation method and the CM ratio. 3. Compute the company's break-even point in unit sales using the contribution margin method. 4. Compute the company's break-even point in sales dollars using the contribution margin method and the CM ratio.