Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 75 51 $ 24 100% 68 32% Fixed expenses are $75,000 per month and the company is selling 4,000 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 25%. 2-b. Should the higher-quality components be used?
Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 75 51 $ 24 100% 68 32% Fixed expenses are $75,000 per month and the company is selling 4,000 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 25%. 2-b. Should the higher-quality components be used?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin
Percent
Per Unit of Sales
$ 75
51
$ 24
100%
68
32%
Fixed expenses are $75,000 per month and the company is selling 4,000 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 25%.
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 $4 per unit and increase unit sales by 25%.
Net operating income
by
<Req 2A
Req 2B >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fca0203db-1590-430b-a793-57eb48ba732e%2F321d8522-2a8b-4d65-96ce-abbc85faa218%2Fk6s25v_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin
Percent
Per Unit of Sales
$ 75
51
$ 24
100%
68
32%
Fixed expenses are $75,000 per month and the company is selling 4,000 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 25%.
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 $4 per unit and increase unit sales by 25%.
Net operating income
by
<Req 2A
Req 2B >
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