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Exercise 6-5 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO6-4]

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Data for Hermann Corporation are shown below:

	Per Unit	Percent of Sales
Selling price	$ 80	100%
Variable expenses	44	55
Contribution margin	$ 36	45%

Fixed expenses are $76,000 per month and the company is selling 2,500 units per month.

Exercise 6-5 (Algo) Part 1

Required:

1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,100, the monthly sales volume increases by 100 units, and the total monthly sales increase by $8,000?

1-b. Should the advertising budget be increased?