Question: Data for Herron Corporation are shown below: Per Unit Percent of Sales Selling price $ 75 100% Variable expenses 45 60% Contribution margin $ 30

Data for Herron Corporation are shown below:

	Per Unit		Percent of Sales
Selling price	$	75	100%
Variable expenses		45	60%

Contribution margin	$	30	40%

Fixed expenses are $75,000 per month and the company is selling 3,000 units per month.

1-a.

The marketing manager believes that an $8,000 increase in the monthly advertising budget would increase monthly sales by $15,000. Calculate the increase or decrease in net operating income.

2-a.	Management is considering using higher-quality components that would increase the variable cost by $3 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Calculate the change in total contribution margin.

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