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Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 60 39 100% 65 $
Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 60 39 100% 65 $ 21 35% Fixed expenses are $72,000 per month and the company is selling 4,200 units per month. 2-a. Refer to the data above. 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%. (See below for a hint if you are having trouble getting to the right answer.) 2-b. Should the higher-quality components be used?
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2a First lets calculate the new selling price and variable expenses per unit after applying the 25 i...Get Instant Access to Expert-Tailored Solutions
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