Question
Exercise 5-5 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO5-4] Skip to question [The following information applies to the questions displayed
Exercise 5-5 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO5-4]
Skip to question
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Per Unit | Percent of Sales | |
---|---|---|
Selling price | $ 65 | 100% |
Variable expenses | 39 | 60 |
Contribution margin | $ 26 | 40% |
Fixed expenses are $73,000 per month and the company is selling 4,300 units per month.
Exercise 5-5 (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 $5 per unit and increase unit sales by 25%.
2-b. Should the higher-quality components be used?
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