Question
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price
Required information
[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 $78,000 per month and the company is selling 3,500 units per month.
Garrison 16e Rechecks 2017-05-02
2-a. Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $4 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin.
2-b. Should the higher-quality components be used?
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