Question

nei-qudilly Components dulcedse we validule expense Uy 94 per un dll . Should the higher-quality components be used? Crease unnt Sdres by 2020. 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 20%. Net operating income by Req 2B > < Prev 4 or 12 H Next >

Answer 1

	Current	Revised
Unit Sales	3500	4200
Selling price per unit	$                         90	$                            90
Variable expenses per unit	$                         63	$                            67
Contribution margin per unit	$                         27	$                            23
Contribution margin	$                  94,500	$                     96,600
Less:Fixed expenses	$                  78,000	$                     78,000
Net Income	$                  16,500	$                     18,600
Since the Revised Contribution margin is greater than the Current Contribution margin hence high-quality components should be used