Assignments: Principles of FChapter 5 Homework XC Solved: Data for Hermann C+v O

Question

Assignments: Principles of FChapter 5 Homework XC Solved: Data for Hermann C+v O https/newconnect.mheducation.com/Mow/connecthtmi hapter 5 Homework 2 0 Required information Exercise 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume LOS-4] The fowowing information applies to the questions displayed below. Data for Hermann Corporation are shown below Selling price Variable expenses 4- Contribution narzin 36 s 88 Fixed expenses are $76,000 per month and the company is selling 2,500 units per month. PExercise 5-5 Part 2 edevences2-a. Re er 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? Complete this question by entering your answers in the tabs below. Rea 2A Req 28 Refer to the onriginal data. Management is considering using higher-quelity components that would increase the variable expense by $4 per unit. The marketrg manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin. Req 2B

Explanation / Answer

2a 2500*1.2= 3000 units Per unit Total amount Selling price 80 240000 (80*3000) Variable cost 48 144000 (48*3000) Contribution margin 32 96000 Contribution margin earlier 36*2500 90000 Contribution margin increase by 6000 (96000-90000) 2b Yes it should be used as contribution margin increase

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