Here is the data for Herron Corporation:

	Per unit	Sales ratio
selling price	$ 75	100%
Variable expenses	45	60%
Contribution margin	$ 30	40%

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

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

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