[The following information applies to the questions displayed below.] 1a. The ma

Question

[The following information applies to the questions displayed below.]

1a.

The marketing manager believes that an $7,800 increase in the monthly advertising budget would increase monthly sales by $14,200. Calculate the increase or decrease in net operating income. (Input the amount as a positive value. Omit the "$" sign in your response.)

2a.

Management is considering using higher-quality components that would increase the variable cost by $4 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin. (Input the amount as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

[The following information applies to the questions displayed below.]

Data for Herron Corporation are shown below: The marketing manager believes that an $7,800 increase in the monthly advertising budget would increase monthly sales by $14,200. Calculate the increase or decrease in net operating income. (Input the amount as a positive value. Omit the "$" sign in your response.) Should the advertising budget be increased ? Management is considering using higher-quality components that would increase the variable cost by $4 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin. (Input the amount as a positive value. Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Should the higher-quality components be used?

Explanation / Answer

1A
Existing Sale = 4600*70 = $322000
Contribution Margin = Sales*Contribution ratio
= 322000*0.4 = $128800
Profit = Contribution Margin

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