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Data for Hermann Corporation are shown below:
Per Unit Percent of Sales
Selling price $ 50 100%Variable expenses 28 56Contribution margin $ 22 44%
Fixed expenses are $70,000 per month and the company is selling 4,000 units per month.
Problem 1: 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 25%.
Problem 2: Should the higher-quality components be used?
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Sarratt Corporation's contribution margin ratio,Estimate the company's net operating income for May, assuming that the fixed monthly expenses do not change.
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Read the attached article, published by AccountingWeb, in Appendix A about Tesco plc, a UK supermarket chain with interests throughout Asia, and read Note 12 to the financial statements on Property, Plant and Equipment.
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