Question

Could someone please help me answer this question?

Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Percent of Sales 100% 60 Per Unit $ 115 69 Selling price Variable expenses Contribution margin $ 46 40% Fixed expenses are $83,000 per month and the company is selling 2,500 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,800 and monthly sales increase by $17,250? 1-b. Should the advertising budget be increased? Complete this question by entering your answers in the tabs below. Req 1A Reg 1B How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,800 and monthly sales increase by $17,250? (Round any unit calculations up to the nearest whole unit.) Net operating income decreases by $ 30,800 < Req 1A Req 1B >

Answer 1

1 a :Statement of comparative income

	Before increasement	After incresement
Sold units	2500	(2500 + $17250/$115)= 2650
Sales	2500 X $115 = $287500	2650 X $115 = $304750
Less:Variable cost	2500 X $69 =$172500	2650 X $69 =$182850
Advertising expenses increased	-	$8800
Contribution margin	$115000	$113100
Fixed Cost	$83000	$83000
Net Operating income	$32000	$30100

Net operating income decrease by $1900 ($32000 - $30100)

1 b: No.