hapter 5 Help SaveExit 6 Check n Required information The fo

hapter 5 Help Save&Exit; 6 Check n Required information The following information applies to the questions displayed below) Data for Hermann Corporation are shown below Part 3 of 4 s 65 10 Selling peice Variable expenses Contribution margin 26 Fixed expenses are $73,000 per month and the company is selling 4.300 units per month e Required: -a. The marketing manager argues that a $9700 increase in the monthly advertising budget would increase monthly sales by $23,500 Calculate the increase or decrease in net operating income b. Should the advertising budget be increased? the tabs below. Complete this question by entering your answers in 4 caps lock

Solution

1-a)

Increase in net operating income:

= Increase in contribution – Increase in advertising budget

= $23,500×40%-$9,700

= -$300

Hence, net operating income decreases by $300.

1-b)

No, Advertising budget should not be increased.