Data for Hermann Corporation are shown below: Per Unit $135 81 Percent of Sales 100% 60 Selling price Variable expenses, Contribution margin $ 54 40% Fixed expenses are $87,000 per month and the company is selling 2,900 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 $5 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used? Complete this question by entering your answers in the tabs below. Req 2A Req 2B 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 $5 per unit and increase unit sales by 20%. Net operating income by

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Data for Hermann Corporation are shown below: (See image attached)

Fixed expenses are $87,000 per month and the company is selling 2,900 units per month.

Required:

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 $5 per unit and increase unit sales by 20%.

2-b. Should the higher-quality components be used?

!
Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Per
Unit
$135
81
Percent
of Sales
100%
60
Selling price
Variable expenses
Contribution
$ 54
40%
margin
Fixed expenses are $87,000 per month and the company is selling 2,900 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 $5 per unit and increase unit sales by 20%.
2-b. Should the higher-quality components be used?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 2B
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 $5 per unit and increase unit sales by 20%.
Net operating
income
by
Transcribed Image Text:! Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit $135 81 Percent of Sales 100% 60 Selling price Variable expenses Contribution $ 54 40% margin Fixed expenses are $87,000 per month and the company is selling 2,900 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 $5 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used? Complete this question by entering your answers in the tabs below. Req 2A Req 2B 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 $5 per unit and increase unit sales by 20%. Net operating income by
Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Per
Percent
Selling price
Variable expenses,
Contribution
Unit
$135
81
of Sales
100%
60
$ 54
40%
margin
Fixed expenses are $87,000 per month and the company is selling 2,900 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 $5 per unit and increase unit sales by 20%.
2-b. Should the higher-quality components be used?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 2B
Should the higher-quality components be used?
Yes
ONo
Transcribed Image Text:Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Percent Selling price Variable expenses, Contribution Unit $135 81 of Sales 100% 60 $ 54 40% margin Fixed expenses are $87,000 per month and the company is selling 2,900 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 $5 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used? Complete this question by entering your answers in the tabs below. Req 2A Req 2B Should the higher-quality components be used? Yes ONo
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