Exercise 6-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume [LO6-4]

[The following information applies to the questions displayed below.]

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.

Exercise 6-5 Part 2

2-a. Refer to the original data. However, in the text it is provided as "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?

Exercise 6-6 Break-Even Analysis [LO6-5]

Mauro Products distributes a single product, a woven basket whose selling price is $15 per unit and whose variable expense is $12 per unit. The companys monthly fixed expense is $4,200.

Required:

1. Calculate the companys break-even point in unit sales.

2. Calculate the companys break-even point in dollar sales.

3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?