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How much will net operating income increase per month

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Reference no: EM133026985

Question - 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.

Required -

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%.

b. Should the higher-quality components be used?

Reference no: EM133026985

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