Required information [The following information applies to the questions displayed below] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 55 Percent of Sales 100% 33 60 $ 22 40% Fixed expenses are $71,000 per month and the company is selling 4,100 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?
Required information [The following information applies to the questions displayed below] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 55 Percent of Sales 100% 33 60 $ 22 40% Fixed expenses are $71,000 per month and the company is selling 4,100 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
Per Unit
$ 55
Percent of
Sales
100%
33
60
$ 22
40%
Fixed expenses are $71,000 per month and the company is selling 4,100 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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F16d38736-89ac-4d4c-8ff3-3914e9f8a8a4%2F99b75f78-c8a8-4d11-8599-37b90622644a%2Fk83m5zg_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
Per Unit
$ 55
Percent of
Sales
100%
33
60
$ 22
40%
Fixed expenses are $71,000 per month and the company is selling 4,100 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?
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