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-a. The marketing manager argues that a $5,000 increase in the monthly advertising budget would increase monthly sales by $9,000. Calculate the increase or decrease in net operating income.
Net operating income by
1-b. Should the advertising budget be increased?
Yes or No.