Question

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 20%.

Answer #1

Solution :

The Operating Income will **increase** by **$
2,100.**

Working :

**Step 1 : Current Income**

Current Income = (Units Sold * Contribution per Unit) - fixed Cost

Current Income = (3,500 * $ 33) - $ 82,000

= $ 115,500 - $ 82,000

= $ 33,500

**Step 2 : Revised Units of Sales and Contribution per
Unit**

Increase in Unit by 20%

Revised Units = 3,500 * 1.20

= 4,200 Units

Revised Contrbution = Sales Price per Units - Revised Variable Cost per Unit

= $ 110 - ($ 77 + $ 5)

= $ 28

**Step 3 : Revised Income**

Revised Income = (Units Sold * Contribution per Unit) - fixed Cost

Revised Income = (4,200 * $ 28) - $ 82,000

= $ 117,600 - $ 82,000

= $ 35,600

**Step 4 : Increase (Decrease) In Income :**

Increase in Income = Revised Income - Currnt Income

= $ 35,600 - $ 33,500

**= $ 2,100**

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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
$
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%....

[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...

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%

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:
Per Unit Percent
of Sales
Selling price $ 60
100%
Variable expenses 39
65%
Contribution margin $ 21
35%
Fixed expenses are $72,000 per month and the company is selling
4,200 units per month.
4.value:
10.00 pointsRequired information
Required:
1-a. The marketing manager argues that a $9,600 increase in the
monthly advertising budget would increase monthly sales by $23,000....

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