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Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 50 100 % Variable expenses 28 56 Contribution margin $
Data for Hermann Corporation are shown below:
Per Unit | Percent of Sales | ||||||
Selling price | $ | 50 | 100 | % | |||
Variable expenses | 28 | 56 | |||||
Contribution margin | $ | 22 | 44 | % | |||
Fixed expenses are $70,000 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?
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