Data for Herron Corporation are shown below:
Fixed expenses are $75,000 per month and the company is selling 3,000 units per month.
1. The marketing manager believes that an $8,000 increase in the monthly advertising budget would increase monthly sales by $15,000. Should the advertising budget be increased?
2. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $3 per unit. The marketing manager believes that the higher-quality product would increase sales by 15% per month. Should the higher-quality components be used?
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