[The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 85 100% Variable expenses 51 60% Contribution margin $ 34 40% ________________________________________ Fixed expenses are $77,000 per month and the company is selling 2,600 units per month.

value: 10.00 points Required information

Required: 1-a. The marketing manager argues that a $8,200 increase in the monthly advertising budget would increase monthly sales by $16,000. Calculate the increase or decrease in net operating income.

b. Should the advertising budget be increased? Yes                No

EasyLearning Objective: 03-04 Show the effects on net operating income of changes in variable costs, fixed costs, selling price, and volume. Check my work

value: 10.00 points

Required information

a. Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $5 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin.

b. Should the higher-quality components be used? Yes             No