Question

Data for Hermann Corporation are shown below:

Per Unit | Percent of Sales | ||||||

Selling price | $ | 130 | 100 | % | |||

Variable expenses | 78 | 60 | |||||

Contribution margin | $ | 52 | 40 | % | |||

Fixed expenses are $86,000 per month and the company is selling 2,800 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 $6 per unit and increase unit sales by 15%

Answer #1

Calculation of net
operating income under current plan **:**

Sales [ 2,800 units * $130 ] | $364,000 |

(-) Variable cost [ 2,800 units * $78 ] | ( $218,400 ) |

Contribution margin | $145,600 |

(-) Fixed expenses | ( $86,000 ) |

Net operating income |
$59,600 |

Calculation of net
operating income if the company uses higher-quality
components **:**

Here, the variable cost per unit will increase by $6 and Sales units will increase by 15%

So, variable cost per unit = $78 + $6 = $84

Total sales units = 2,800 + [ 2,800 * 15% ] = 3,220 units

Sales [ 3,220 units * $130 ] | $418,600 |

(-) Variable cost [ 3,220 units * $84 ] | ( $270,480 ) |

Contribution margin | $148,120 |

(-) Fixed expenses | ( $86,000 ) |

Net operating income |
$62,120 |

*If the company uses higher-quality components, its
net operating income will increase by $2,520 per month [ i.e.
$62,120 - 59,600 ]*

Data for Hermann Corporation are shown below:
Per Unit
Percent of Sales
Selling price
$
100
100
%
Variable expenses
61
61
Contribution margin
$
39
39
%
Fixed expenses are $80,000 per month and the company is selling
3,700 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 $3
per unit and increase unit sales by 15%....

1) Data for Hermann Corporation are shown below:
Per Unit
Percent of Sales
Selling price
$
110
100
%
Variable expenses
77
70
Contribution margin
$
33
30
%
Fixed expenses are $82,000 per month and the company is selling
3,500 units per month.
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 $5
per unit and increase unit sales by...

Data for Hermann Corporation are shown below: Per Unit Percent
of Sales Selling price $ 70 100 % Variable expenses 49 70
Contribution margin $ 21 30 % Fixed expenses are $74,000 per month
and the company is selling 4,400 units per month. Exercise 5-5
(Algo) Part 2 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 unit and...

Data for Hermann Corporation are shown below:
Per Unit
Percent of Sales
Selling price
$
80
100
%
Variable expenses
44
55
Contribution margin
$
36
45
%
Fixed expenses are $76,000 per month and the company is selling
2,500 units per month.
rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765,
07_14_2020_QC_CS-216765
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 unit and increase...

Data for Hermann Corporation are shown below:
Per Unit
Percent
of Sales
Selling price
$
90
100
%
Variable expenses
63
70
Contribution margin
$
27
30
%
1-a. 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?
1-b. Should the advertising budget be increased?
2-a. Refer to the original data. How much will net...

Data for Chocolate Corporation are shown below:
Per Unit
Percent of Sales
Selling price
$
135
100
%
Variable
expenses
81
60
Contribution
margin
$
54
40
%
Fixed expenses are $87,000 per month and the company is selling
2,900 units per month.
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 $5 per unit and
increase unit sales by 20%.
Net...

Data for Hermann Corporation are shown below:
Per Unit
Percent of Sales
Selling price
$
100
100
%
Variable expenses
61
61
Contribution margin
$
39
39
%
Fixed expenses are $80,000 per month and the company is selling
3,700 units per month.
Required:
1-a. How much will net operating income increase (decrease) per
month if the monthly advertising budget increases by $8,500 and
monthly sales increase by $17,500?
1-b. Should the advertising budget be increased?

Data for Hermann Corporation are shown below:
Per Unit
Percent of Sales
Selling price
$
80
100
%
Variable expenses
44
55
Contribution margin
$
36
45
%
Fixed expenses are $76,000 per month and the company is selling
2,500 units per month.
rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765,
07_14_2020_QC_CS-216765
Required:
1-a. How much will net operating income increase (decrease) per
month if the monthly advertising budget increases by $8,100 and
monthly sales increase by $14,400?
1-b. Should the advertising budget be increased?

[The following information applies to the questions
displayed below.]
Data for Hermann Corporation are shown below:
Fixed expenses are $82,000 per month and the company is
selling 3,500 units per month.
Per Unit
Percent of Sales
Selling price
$
110
100
%
Variable expenses
$
77
70
%
Contribution margin
$
33
30
%
Fixed expenses are $82,000 per month and the company is selling
3,500 units per month.
1-a. How much will net operating income increase (decrease) per
month...

Required information [The following information applies to the
questions displayed below.] Data for Hermann Corporation are shown
below: Per Unit Percent of Sales Selling price $ 130 100 % Variable
expenses 78 60 Contribution margin $ 52 40 % Fixed expenses are
$86,000 per month and the company is selling 2,800 units per month.
rev: 06_04_2020_QC_CS-205709, 06_18_2020_QC_CS-216765,
07_14_2020_QC_CS-216765 Required: 1-a. How much will net operating
income increase (decrease) per month if the monthly advertising
budget increases by $9,100 and monthly...

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