Reference no: EM132605286

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.

Required:

Question 1: How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthly sales increase by $9,000?

Question 2: Should the advertising budget be increased?