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Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Polaris expects to sell 20,000 door handles and
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Polaris expects to sell 20,000 door handles and 40,000 trim kits. Fixed cost equals $147,840. Each door handle sells for $12 and has variable cost of $8.4; each trim kit sells for $8 and has variable cost of \$5. Data Required: 1. How many door handles and how many trim kits must be sold for Polaris to break even? 2. Given the expected sales volume, what would be its margin of safety in units and operating leverage? By what percentage will operating income increase when total sales units will increase by 15% ? 3. Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by $35,000, and 60,000 trim kits can be produced and sold. Is this a good idea? Calculate the impact on the operating income
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