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Exercise 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO4] ...

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Accounting

Exercise 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO4]

[The following information applies to the questions displayed below.]
Data for Herron Corporation are shown below:

Per Unit Percent of Sales
Selling price $ 60 100%
Variable expenses 42 70%
Contribution margin $ 18 30%

Fixed expenses are $75,800 per month and the company is selling 4,100 units per month.

Exercise 5-5 Part 1

Required:

1a.

The marketing manager believes that an $8,700 increase in the monthly advertising budget would increase monthly sales by $16,000. Calculate the increase or decrease in net operating income. (Input the amount as a positive value. Omit the "$" sign in your response.)

Net operating income (Click to select)decreasesincreases by $

1b. Should the advertising budget be increased ?
No
Yes

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