Homework SourseThe following information applies to the questions displayed
The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Sales 100% 60% Per Unit $ 85 Selling price Variable expenses 51 Contribution margin $ 34 40% dpenes ae 570pnyeling 2600Unis per moohn
![The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Sales 100% 60% Per Unit $ 85 Sell](/WebImages/41/the-following-information-applies-to-the-questions-displayed-1128290-1761602157-0.webp "The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Sales 100% 60% Per Unit $ 85 Sell")
Solution
Hence net operating income decreases by =(11400-9600)=$1800
Hence advertising budget should not be increased.
| Current | Proposed | |
| Sales | (85*2600)=$221000 | (221000+16000)=$237000 |
| Variable expenses | (221000*0.6)=$132600 | (237000*0.6)=$142200 |
| Contribution margin | $88400 | $94800 |
| Fixed expenses | $77000 | (77000+8200)=$85200 |
| Net operating income | $11400 | $9600. |
