Change in sales mix and contribution margin OBJ. 4 Head Pops Inc. manufactures two models of solar

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Change in sales mix and contribution margin OBJ. 4 Head Pops Inc. manufactures two models of solar powered noise-canceling headphones: Sun Sound and Ear Bling models. The company is operating at less than full capacity. Market research indicates that 28,000 additional Sun Sound and 30,000 additional Ear Bling headphones could be sold. The income from operations by unit of product is as follows:

Sun Sound Headphone Ear Bling Headphone Sales price $140.00 $125.00 Variable cost of goods sold 78.40 70.00 Manufacturing margin $ 61.60 $ 55.00 Variable selling and administrative expenses 28.00 25.00 Contribution margin $ 33.60 $ 30.00 Fixed manufacturing costs 14.00 12.50 Income from operations $ 19.60 $ 17.50 Prepare an analysis indicating the increase or decrease in total profitability if 28,000 additional Sun Sound and 30,000 additional Ear Bling headphones are produced and sold, assuming that there is sufficient capacity for the additional production.

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Financial And Managerial Accounting

ISBN: 9781305267831,9781305267848

13th Edition

Authors: Carl S. Warren , James M. Reeve , Jonathan Duchac

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