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2.A . Net operating income increase by $4000
Current net operating income = contribution margin - fixed cost
Contribution margin = contribution per unit * total number of units sold
4000 units * $24 = $96000
Fixed cost = $75000
Net operating income = $96000-75000= $21000
If higher quality equipment is used then
New contribution margin = Sales - new variable cost
New variable cost = ($51+4)= $55
New contribution margin per unit = sale - new variable cost
$75- 55= $20
Total number of units sold according to new plan
4000 units + 25% of 4000 units= 4000+1000= 5000 units
Total contribution of high quality equipment is used
5000 units *$20= $100000
Net operating income = $100000-75000(fixed cost)= $25000
Increase in net operating income if high quality equipment is used = $25000-21000= $4000
Net operating income increase by $4000
2.B Yes company should use higher quality equipment because it will increase net operating income by $4000 as calculated in part 2.A
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Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 140 91 Percent of Sales 100% 65 35% $ 49 Fixed expenses are $88,000 per month and the company is selling 3,000 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...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit $ 110 Percent of Sales 100% Selling price Variable expenses Contribution margin 77 70 in $ 33 30% Fixed expenses are $82,000 per month and the company is selling 3,500 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,700 and monthly sales increase by $18,500? 1-b....
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Percent of Sales 100% Selling price Variable expenses Contribution margin Per Unit $ 115 69 $ 46 60 40% Fixed expenses are $83,000 per month and the company is selling 2.500 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...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 130 78 Percent of Sales 100% 60 40% Fixed expenses are $86,000 per month and the company is selling 2,800 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,100 and monthly sales increase by $20,500? 1-b. Should the advertising...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 90 100% 63 $ 27 3 0 70 Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthly sales increase by $9,000? 1-b....
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 90 63 $ 27 Percent of Sales 100% 70 30% Fixed expenses are $78,000 per month and the company is selling 3,500 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...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit $ 90 Percent of Sales 100% Selling price Variable expenses Contribution margin 63 70 30% Fixed expenses are $78,000 per month and the company is selling 3,500 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...
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are...
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Percent of Sales 100% 60 Per Unit $ 135 81 $ 54 Selling price Variable expenses Contribution margin 40% Fixed expenses are $87,000 per month and the company is selling 2,900 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,200 and monthly sales increase by $21,000? 1-b. Should...
Required information The following information applies to the questions displayed below. Data for Hermann Corporation are...
Required information The following information applies to the questions displayed below. Data for Hermann Corporation are shown below Percent Per Unit of Sales 108% Selling price var1able expenses Contribution margin S 90 63 ed S 27 30% Fixed expenses are $30,000 per month and the company is selling 2.000 units per month. 2-o. 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...
Check Required information (The following information applies to the questions displayed below.) Data for Hermann Corporation...
Check Required information (The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Per Unit Percent of Sales 1000 70 Selling price Variable expenses Contribution margin $ 110 $ 33 306 Fixed expenses are $82,000 per month and the company is selling 3,500 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...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 140 91 Percent of Sales 100% 65 35% $ 49 Fixed expenses are $88,000 per month and the company is selling 3,000 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...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit $ 110 Percent of Sales 100% Selling price Variable expenses Contribution margin 77 70 in $ 33 30% Fixed expenses are $82,000 per month and the company is selling 3,500 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $8,700 and monthly sales increase by $18,500? 1-b....
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Percent of Sales 100% Selling price Variable expenses Contribution margin Per Unit $ 115 69 $ 46 60 40% Fixed expenses are $83,000 per month and the company is selling 2.500 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...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 130 78 Percent of Sales 100% 60 40% Fixed expenses are $86,000 per month and the company is selling 2,800 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,100 and monthly sales increase by $20,500? 1-b. Should the advertising...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Percent Per Unit of Sales $ 90 100% 63 $ 27 3 0 70 Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $5,000 and monthly sales increase by $9,000? 1-b....
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Per Unit $ 90 63 $ 27 Percent of Sales 100% 70 30% Fixed expenses are $78,000 per month and the company is selling 3,500 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...
Required information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Per Unit $ 90 Percent of Sales 100% Selling price Variable expenses Contribution margin 63 70 30% Fixed expenses are $78,000 per month and the company is selling 3,500 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...
Required information [The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Percent of Sales 100% 60 Per Unit $ 135 81 $ 54 Selling price Variable expenses Contribution margin 40% Fixed expenses are $87,000 per month and the company is selling 2,900 units per month. Required: 1-a. How much will net operating income increase (decrease) per month if the monthly advertising budget increases by $9,200 and monthly sales increase by $21,000? 1-b. Should...
Required information The following information applies to the questions displayed below. Data for Hermann Corporation are shown below Percent Per Unit of Sales 108% Selling price var1able expenses Contribution margin S 90 63 ed S 27 30% Fixed expenses are $30,000 per month and the company is selling 2.000 units per month. 2-o. 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...
Check Required information (The following information applies to the questions displayed below.) Data for Hermann Corporation are shown below: Per Unit Percent of Sales 1000 70 Selling price Variable expenses Contribution margin $ 110 $ 33 306 Fixed expenses are $82,000 per month and the company is selling 3,500 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...
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