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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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