Question
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
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: 1 Sun Sound Headphone Ear Bling Headphone 2 Sales price $140.00 $125.00 3 Variable cost of goods sold 78.40 70.00 4 Manufacturing margin $61.60 $55.00 5 Variable selling and administrative expenses 28.00 25.00 6 Contribution margin $33.60 $30.00 7 Fixed manufacturing costs 14.00 12.50 8 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. Round your per-unit answers to two decimal places.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started