EXERCISE 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [L05-41 Data for Hermann Corporation are shown below: Per Unit Percent of Sales $90 63 Selling price....... Variable expenses ...... Contribution margin ... 100% 70 30% Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Required: 1. The marketing manager argues that a $5,000 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 expense by $2 per unit. The marketing manager believes that the higher-quality product would increase sales by 10% per month. Should the higher-quality components be used