Question
Required information Skip to question [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of
Required information 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 $ 55 100% Variable expenses 33 60 Contribution margin $ 22 40% Fixed expenses are $71,000 per month and the company is selling 4,100 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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