Data for Hermann Corporation are shown below Per Unit s 105 Percent of Sales 100
ID: 2341816 • Letter: D
Question
Data for Hermann Corporation are shown below Per Unit s 105 Percent of Sales 100% elling price Variable expensers Contribution nargin 5 42 40% Fxed expenses are $81.000 per month and the company is selling 3,800 units per month. 2-a. Refer to the original data. company uses higher-quality components that increase the variable expense by $4 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used? How much will net operating income increase (decrease) per month if the Complete this question by entering your answers in the tabs below Req 2A Req 2B Refer to the original data. How much will net operating income increase (decrease) per month if the company quality components that increase the variable expense by S4 per unit and increase unit sales by 20%.Explanation / Answer
2a. Current net operating income = Total Contribution Margin - Fixed Cost = 3,800 x $ 42 - $ 81,000 = $ 78,600.
Proposed net operating income = 3,800 x 120 % x $ 38 - $ 81,000 = $ 92,280.
Increase in net operating income = $ 92,280 - $ 78,600 = $ 13,680.
2b. Yes.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.