Exercise 5-7 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Unit Sales [LO5-7] [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $85 51 $ 34 Exercise 5-7 (Algo) Part 2 Percent of Sales 100% 60 40% Fixed expenses are $77,000 per month and the company is selling 2,600 units per month. 2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quali components that increase the variable expense by $5 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used?
Exercise 5-7 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Unit Sales [LO5-7] [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $85 51 $ 34 Exercise 5-7 (Algo) Part 2 Percent of Sales 100% 60 40% Fixed expenses are $77,000 per month and the company is selling 2,600 units per month. 2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher-quali components that increase the variable expense by $5 per unit and increase unit sales by 20%. 2-b. Should the higher-quality components be used?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Exercise 5-7 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Unit Sales [LO5-7]
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin
Per Unit
$ 85
51
$ 34
Exercise 5-7 (Algo) Part 2
Percent of
Sales
100%
60
40%
Fixed expenses are $77,000 per month and the company is selling 2,600 units per month.
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 $5 per unit and increase unit sales by 20%.
2-b. Should the higher-quality components be used?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe36fa669-278e-407f-af81-e0f82aa5215e%2F7814e3e6-a173-488e-b7b0-70aed06a01da%2F71as8rs_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 5-7 (Algo) Changes in Variable Costs, Fixed Costs, Selling Price, and Unit Sales [LO5-7]
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Selling price
Variable expenses
Contribution margin
Per Unit
$ 85
51
$ 34
Exercise 5-7 (Algo) Part 2
Percent of
Sales
100%
60
40%
Fixed expenses are $77,000 per month and the company is selling 2,600 units per month.
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 $5 per unit and increase unit sales by 20%.
2-b. Should the higher-quality components be used?
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