Question: Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 95 100 % Variable expenses 57 60 Contribution margin $

Data for Hermann Corporation are shown below:

Per Unit Percent of Sales
Selling price $ 95 100 %
Variable expenses 57 60
Contribution margin $ 38 40 %

Fixed expenses are $79,000 per month and the company is selling 3,600 units per month.

Garrison 16e Rechecks 2017-05-02

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 $3 per unit and increase unit sales by 10%.

2-b. Should the higher-quality components be used?

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