Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 125 100% Variable expenses 80 64 Contribution margin $ 45 36% Fixed expenses are $85,000 per month and the company is selling 2,700 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

Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 125 100% Variable expenses 80 64 Contribution margin $ 45 36% Fixed expenses are $85,000 per month and the company is selling 2,700 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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	Per Unit	Percent of Sales
Selling price	$ 125	100%
Variable expenses	80	64
Contribution margin	$ 45	36%

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