5) Required information

Data for Hermann Corporation are shown below:

	Per Unit	Percent of Sales
Selling price	$ 60	100%
Variable expenses	39	65
Contribution margin	$ 21	35%

Fixed expenses are $72,000 per month and the company is selling 4,200 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?