Need explanation Changes in Variable Costs, Fixed Costs, Selling Price, and Volume 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. 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?

Need explanation Changes in Variable Costs, Fixed Costs, Selling Price, and Volume 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. 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?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs

Section: Chapter Questions

Problem 1EP

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Need explanation
Changes in Variable Costs, Fixed Costs, Selling Price, and Volume

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.

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?

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?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
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? (Do not round intermediate
calculations.)
Net operating income
by

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