Data for Hermann Corporation are shown below: Percentage of Per Unit Sales Sales price $...
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Data for Hermann Corporation are shown below: Percentage of Per Unit Sales Sales price $ 90 100 Less: Variable expenses 63 70 Contribution margin $ 27 30 Fixed expenses are $40.000 per month, and the company is selling 2.000 units per month. Required: -a. The marketing manager argues that a $4.000 increase in the monthly advertising budget would increase monthly sales by $9.000. Show the effect of this change on the net income? Complete the table given below to answer the question. (Negative amounts should De indicated by a minus sign.) Current Sales Sales With Additional Advertising Budget Difference Sales Less: Variable expenses Contribution margin Less: Fixed expenses Net income (loss) 1-b. Based on your calculations should the change be made? Yes O No 2-0. Refer to the original data. Management is considering using higher quality components that would increase the variable cost by $2.00 per unit. The marketing manager believes the higher quality product would increase sales by 10% per month. Calculate the change in contribution margin? Change in contribution margin 2-b. Should the higher-quality components be used? O Yes ONO
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