Chapter 6, Problem 5E

Changes in Venable Costs, Fixed Costs, Selling Price, and Volume LO6−4

Date for Herman Corporation are shown below:

 

Fixed expenses are $30,000 per month and the company is selling 2,000 units per month.

Required:

1. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthlysales increase by $9,000?
2. Refer to the original data How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $2 per wilt and increase wilt sales by 10%.