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Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 90 100% Variable expenses 63 70 Contribution margin $ 27

Data for Hermann Corporation are shown below:

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

Fixed expenses are $78,000 per month and the company is selling 3,500 units per month.

Exercise 6-5 (Algo) Part 2

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 20%.

2-b. Should the higher-quality components be used?

Req 2A

Net operating income by

should the higher-quality components be used?

yes or no

\

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