Change in Contribution Margin

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 $33,000$ additional Sun Sound and $36,600$ additional Ear Bling headphones could be sold. The operating income by unit of product is as follows:

Line Item Description Sun Sound

Headphones Ear Bling

Headphones

Sales price $$34\mathrm{.}20$ $$53\mathrm{.}40$

Variable cost of goods sold $(19\mathrm{.}20)(29\mathrm{.}90)$

Manufacturing margin $$15\mathrm{.}00$ $$23\mathrm{.}50$

Variable selling and administrative expenses $(6\mathrm{.}80)(10\mathrm{.}70)$

Contribution margin $$8\mathrm{.}20$ $$12\mathrm{.}80$

Fixed manufacturing costs $(3\mathrm{.}10)(4\mathrm{.}80)$

Operating income $$5\mathrm{.}10$ $$8\mathrm{.}00$

Prepare an analysis indicating the increase or decrease in total profitability if $33,000$ additional Sun Sound and $36,600$ additional Ear Bling headphones are produced and sold, assuming that there is sufficient capacity for the additional production. Round your per unit answers to two decimal places.

Head Pops Inc.

Analysis

Line Item Description Sun Sound

Headphones Ear Bling

Headphones

Unit volume increase Unit volume increase

Unit volume increase

$\backslash$times Contribution margin per unit $$\backslash$times Contribution margin per unit

$$\backslash$times Contribution margin per unit

Increase in profitability $Increase in profitability

$Increase in profitability