Current | Proposed | |
Unit Sales | 2700 | (2700*120%)=3240 |
Sales | (2700*125)=337500 | (3240*125)=405,000 |
Variable expenses | (2700*80)=216,000 | 3240*(80+5)=$275400 |
Contribution margin | 121500 | 129600 |
Fixed expenses | 85,000 | 85,000 |
Net operating income | 36500 | 44600 |
Hence increase in net operating income=44600-36500=$8100
Hence higher quality components should be used.
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are...
(The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 125 80 Percent of Sales 100% 64 36% Fixed expenses are $85,000 per month and the company is selling 2,700 units per month. 2-a. 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%....
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