Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Regular Super Total Units 13,000 4,000 17,000 Sales revenue $
Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.
Regular | Super | Total | |||||||||
Units | 13,000 | 4,000 | 17,000 | ||||||||
Sales revenue | $ | 364,000 | $ | 840,000 | $ | 1,204,000 | |||||
Less: Cost of goods sold | 284,000 | 520,000 | 804,000 | ||||||||
Gross Margin | $ | 80,000 | $ | 320,000 | $ | 400,000 | |||||
Less: Selling expenses | 80,000 | 147,000 | 227,000 | ||||||||
Operating income (loss) | $ | 0 | $ | 173,000 | $ | 173,000 | |||||
Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $20 per unit for Super. Variable selling expenses are $3 per unit for Regular and $20 per unit for Super; remaining selling amounts are fixed. If Omar Industries eliminates Regular and uses the available capacity to produce and sell an additional 1,500 units of Super, what would be the impact on operating income?
$24,000 increase
$40,000 increase
$53,000 increase
$83,000 increase
None of the answers is correct.
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