Current | Proposed | |
Unit sales | 2900 | (2900*1.2)=3480 |
Sales | (2900*135)=391500 | (3480*135)=469800 |
Variable expenses | (2900*81)=234900 | 3480*(81+5)=299280 |
Contribution margin | 156600 | 170520 |
Fixed expenses | 87000 | 87000 |
Net operating income | 69600 | 83520 |
Hence Net operating income increases by =(83520-69600)=$13920
Hence higher quality components should be used.
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are...
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