EXERCISE 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume 0 L05-4 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.

1. 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?

2. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $2 per unit and increase unit sales by 10%.