ata for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 105 100% Variable expenses 63 60 Contribution margin $ 42 40% Fixed expenses are $81,000 per month and the company is selling 3,800 units per month. 2-a. 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 $4 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be
ata for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 105 100% Variable expenses 63 60 Contribution margin $ 42 40% Fixed expenses are $81,000 per month and the company is selling 3,800 units per month. 2-a. 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 $4 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 14EB: Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are...
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Data for Hermann Corporation are shown below:
Per Unit | Percent of Sales | |
---|---|---|
Selling price | $ 105 | 100% |
Variable expenses | 63 | 60 |
Contribution margin | $ 42 | 40% |
Fixed expenses are $81,000 per month and the company is selling 3,800 units per month.
2-a. 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 $4 per unit and increase unit sales by 20%.
2-b. Should the higher-quality components be used?
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