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Accounting
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Data for Hermann Corporation are shown below:
| Per Unit | Percent of Sales | ||||||
| Selling price | $ | 65 | 100 | % | |||
| Variable expenses | 39 | 60 | |||||
| Contribution margin | $ | 26 | 40 | % | |||
Fixed expenses are $73,000 per month and the company is selling 4,300 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 25%.
2-b. Should the higher-quality components be used?
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 25%.
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Should the higher-quality components be used?
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