Selling price Variable expenses Contribution margin Per Unit Percent of Sales 100% 70 _70 $90 63 $27 30%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Changes In Variable Costs, Fixed Costs, Selling Price, and Volume

Data for Hermann Corporation are shown below:

Fixed expenses are $30,000 per month and the company is selling 2,000 units per month.

Required:

1. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthly sales increase by $9,000?

2. 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 $2 per unit and increase unit sales by 10%.

Selling price
Variable expenses
Contribution margin
Per Unit Percent of Sales
100%
70
_70
$90
63
$27
30%
Transcribed Image Text:Selling price Variable expenses Contribution margin Per Unit Percent of Sales 100% 70 _70 $90 63 $27 30%
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