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rovide a short narrative of your analysis of the problem. Explain what theories/ concepts apply, how, and why. Then present the solution/computation. Write a short narrative explaining the meaning of the final answer - its implication to the firm. Write a short recommendation/conclusion based on the analysis and solutions. You solved a current problem only. How can you provide for the future? What about contingencies that may arise? What proactive measures can you t

rovide a short narrative of your analysis of the problem. Explain what theories/ concepts apply, how, and why. Then present the solution/computation. Write a short narrative explaining the meaning of the final answer - its implication to the firm. Write a short recommendation/conclusion based on the analysis and solutions. You solved a current problem only. How can you provide for the future? What about contingencies that may arise? What proactive measures can you t

Financial & Managerial Accounting
Financial & Managerial Accounting
14th Edition
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter19: Cost-Volume-Profit Analysis
Section: Chapter Questions
Problem 19.17EX
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Provide a short narrative of your analysis of the problem. Explain what theories/ concepts apply, how, and why. Then present the solution/computation. Write a short narrative explaining the meaning of the final answer - its implication to the firm. Write a short recommendation/conclusion based on the analysis and solutions. You solved a current problem only. How can you provide for the future? What about contingencies that may arise? What proactive measures can you take?

EXERCISE 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume LO5-4 Data for Hermann Corporation are shown below: Per Unit Percent of Sales $90 100% 63 70 Contribution margin $27 Selling price Variable expenses Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. 30% Page 221 Required: 1. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000? 2. 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 $2 per unit and increase unit sales by 10%.
Transcribed Image Text:EXERCISE 5-5 Changes in Variable Costs, Fixed Costs, Selling Price, and Volume LO5-4 Data for Hermann Corporation are shown below: Per Unit Percent of Sales $90 100% 63 70 Contribution margin $27 Selling price Variable expenses Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. 30% Page 221 Required: 1. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000, the monthly sales volume increases by 100 units, and the total monthly sales increase by $9,000? 2. 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 $2 per unit and increase unit sales by 10%.
E5-5 1a. 1b. 2a. 2b. Sales Variable Expense Contribution Margin Fixed Expenses Net Operating Income No Sales Variable Expense Contributed Margin Current Sales 180,000.00 126,000.00 54,000.00 30,000.00 24,000.00 Fixed Expense Net Operating Expense Net Operating Income Before Changes to be Mad Increase in Net Operating Income Yes 198,000.00 143,000.00 55,000.00 30,000.00 25,000.00 24,000.00 $1,000.00 Sales with Additional Advertising Budget 189,000.00 132,300.00 56,700.00 Difference 9,000.00 6,300.00 2,700.00 35,000.00 5,000.00 21,700.00 -$2,300.00
Transcribed Image Text:E5-5 1a. 1b. 2a. 2b. Sales Variable Expense Contribution Margin Fixed Expenses Net Operating Income No Sales Variable Expense Contributed Margin Current Sales 180,000.00 126,000.00 54,000.00 30,000.00 24,000.00 Fixed Expense Net Operating Expense Net Operating Income Before Changes to be Mad Increase in Net Operating Income Yes 198,000.00 143,000.00 55,000.00 30,000.00 25,000.00 24,000.00 $1,000.00 Sales with Additional Advertising Budget 189,000.00 132,300.00 56,700.00 Difference 9,000.00 6,300.00 2,700.00 35,000.00 5,000.00 21,700.00 -$2,300.00
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