Question: Data for Hermann Corporation are shown below: Per Unit Percent of Sales Selling price $ 60 100% Variable expenses 39 65% Contribution margin $ 21

Data for Hermann Corporation are shown below:

Per Unit

Percent of Sales

Selling price

100%

Variable expenses

65%

Contribution margin

35%

Fixed expenses are $72,000 per month and the company is selling 4,200 units per month.

2-a.

Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $4 per unit. The marketing manager believes that the higher-quality product would increase sales by 25% per month. Calculate the change in total contribution margin.

The total contribtion margin increases or decreases? and by how much?

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