The Hermann Corporation data is shown below:

	Per unit			percent of sales
Sale price	ps	90		100	%
Variable expends		63		70
Contribution margin	ps	27		30	%

Fixed expenses are $30,000 per month, and the company sells 2,000 units per month.

2-a. Check the original data. By how much will net operating income increase (decrease) per month if the company uses higher quality components that increase variable expense by $2 per unit and increase unit sales by 10%?

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

Answer rating: 100% (QA)

2a To calculate the impact of using higher quality components on net operating income we first need to calculate the current net operating income usin... View the full answer