Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Per Unit Sales Selling price Variable expenses $ 60 100% 39 65 Contribution margin $ 21 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. How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $4 per unit and increase unit sales by 25%. 2-b. Should the higher-quality components be used? Complete this question by entering your answers in the tabs below. Req 2A Req 2B 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 $4 per unit and increase unit sales by 25%. Net operating income by < Req 2A Req 2B >
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Percent of Per Unit Sales Selling price Variable expenses $ 60 100% 39 65 Contribution margin $ 21 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. How much will net operating income increase (decrease) per month if the company uses higher-quality components that increase the variable expense by $4 per unit and increase unit sales by 25%. 2-b. Should the higher-quality components be used? Complete this question by entering your answers in the tabs below. Req 2A Req 2B 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 $4 per unit and increase unit sales by 25%. Net operating income by < Req 2A Req 2B >
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...
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Question
![Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Percent of
Per Unit
Sales
$ 60
Selling price
Variable expenses
100%
39
65
Contribution margin
$21
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. How much will net operating income increase (decrease) per month if the company uses higher-quality
components that increase the variable expense by $4 per unit and increase unit sales by 25%.
2-b. Should the higher-quality components be used?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 2B
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 $4 per unit and increase unit sales by 25%.
Net operating income
by
< Req 2A
Req 2B >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2d8ced1e-c405-49cc-9707-ee99115bb45e%2Fc3520dfc-1c33-4dc1-8116-cd6b88804ad4%2Fvkora4o_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Percent of
Per Unit
Sales
$ 60
Selling price
Variable expenses
100%
39
65
Contribution margin
$21
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. How much will net operating income increase (decrease) per month if the company uses higher-quality
components that increase the variable expense by $4 per unit and increase unit sales by 25%.
2-b. Should the higher-quality components be used?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 2B
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 $4 per unit and increase unit sales by 25%.
Net operating income
by
< Req 2A
Req 2B >
![Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Percent of
Per Unit
$ 60
Sales
100%
Selling price
Variable expenses
39
65
Contribution margin
$ 21
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. How much will net operating income increase (decrease) per month if the company uses higher-quality
components that increase the variable expense by $4 per unit and increase unit sales by 25%.
2-b. Should the higher-quality components be used?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 2B
Should the higher-quality components be used?
Yes
ONo](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2d8ced1e-c405-49cc-9707-ee99115bb45e%2Fc3520dfc-1c33-4dc1-8116-cd6b88804ad4%2Fnh09zr7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Data for Hermann Corporation are shown below:
Percent of
Per Unit
$ 60
Sales
100%
Selling price
Variable expenses
39
65
Contribution margin
$ 21
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. How much will net operating income increase (decrease) per month if the company uses higher-quality
components that increase the variable expense by $4 per unit and increase unit sales by 25%.
2-b. Should the higher-quality components be used?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 2B
Should the higher-quality components be used?
Yes
ONo
Expert Solution
Step 1
Contribution means the difference between the selling price and variable cost .
Fixed cost when deducted from contribution , will gives you profit before tax.
Fixed cost remain fixed at all level of output where as variable cost will vary with the level of output.
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