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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
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[The following information applies to the questions displayed below.]
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 $30,000 per month and the company is selling 2,000 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 $2 per unit and increase unit sales by 10%.
2-b. Should the higher-quality components be used?
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