Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

1-a. The marketing manager argues that a $8,800 increase in the monthly advertis

ID: 3178541 • Letter: 1

Question


   

1-a.

The marketing manager argues that a $8,800 increase in the monthly advertising budget would increase monthly sales by $19,000. Calculate the increase or decrease in net operating income.

      


2-a.

Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $5 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Calculate the change in total contribution margin.

Data for Hermann Corporation are shown below:

Explanation / Answer

1-a)

Change in Net Operating Income = Change in sales - Change in variable expense = 19,000 - 8,800 = 10,200

1-b)

Yes.

2-a)

Sales = 115* 1.15 = 132.25

Variable expenses = 69+5 = 74

Contribution = 58.25 ; 44%

2-b) Yes, Since the contribution is incresing when compared to earlier i.e. 46