Business, 29.01.2020 00:48 jaylene125

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:
(1) the marketing manager argues that a $5,000 increase in the monthly advertising budget would increase monthly sites by $9,000.
should the advertising budget be increased?
(2) refer to the original data. how much will net operating income increase per month if the company uses higher-quality components that increase the variable expense by $2 per unit and increase unit sales by 10%?

Answers: 3

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Answer from: Dweath50

1. Yes, the advertising budget should be increased.

2. Calculation to determine the net operating income

First step is to Current net operating income

Using this formula

Current net operating income= Total Contribution margin - Fixed cost

Let plug in the formula

Current net operating income= (2,000×$27) - $30,000

Current net operating income=$54,000-$30,000

Current net operating income=$24,000

Second step is to determine the Projected net operating income

Projected net operating income= [2,000+10%×($27-$2)] -$30,000

Projected net operating income=($200×$25)-$30,000

Projected net operating income=$5,000-$30,000

Projected net operating income=$25,000

Now let determine the Net operating income increases

Net operating income increases =$25,000- $24,000

Net operating income increases =$1,000

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Answer from: rockstargirl9245

1) Yes monthly advertising budget should be increased as it increases the sales by $ 9000 even then there would be profit of $ 4000

2) the net operating income will increase by (38,000-24,000) = $ 14,000

Explanation:

Given

Sales 2000 units for $ 90 = $ 180,000

Variable Expenses = $126,000

Contribution Margin = $ 54,000

Less Fixed Expenses = $ 30,000

Operating Income = $ 24,000

1) Yes monthly advertising budget should be increased as it increases the sales by $ 9000 even then there would be profit of $ 4000

2) the net operating income will increase by (38,000-24,000) = $ 14,000

Sales 2000 units for $ 99 = $ 198,000

Variable Expenses (63 +2= $65) = $130,000

Contribution Margin = $ 68,000

Less Fixed Expenses = $ 30,000

Operating income = $ 38,000

Answer from: Quest

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Answer from: Quest

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Data for hermann corporation are shown below:

per unit percent of sales
selling p...

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