subject
Business, 29.01.2020 04:47 zel990252

Data for hermann corporation are shown below:
per unit percent
of sales
selling price $90 100%
variable expenses
63

70%

contribution margin
$27

30%

fixed expenses are $30,000 per month and the company is selling 2,000 units per month.

requirement 1:
(a)calculate the increase or decrease in net operating income if a $5,000 increase in the monthly advertising budget would increase monthly sales by $9,000. net operating income: ?
(b)should the advertising budget be increased as suggested in requirement 1(a) above?
requirement 2:
refer to the original data. management is considering using higher-quality components that would increase the variable cost by $2 per unit. the marketing manager believes the higher-quality product would increase sales by 10% per month. should the higher-quality components be used?

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Answers: 1

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Data for hermann corporation are shown below:
per unit percent
of sales
selling p...

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