Data for Hermann Corporation are shown below: Per...
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Accounting
Data for Hermann Corporation are shown below:
Per Unit
Percent of Sales
Selling price
$
120
100
%
Variable expenses
78
65
Contribution margin
$
42
35
%
Fixed expenses are $84,000 per month and the company is selling 2,600 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 $5 per unit and increase unit sales by 20%.
2-b. Should the higher-quality components be used?
Answer & Explanation
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