Problem 12-25 Relevant Cost Analysis in a Variety of Situations [LO2] Ovation Company has a single product called a Bit. The company normally produces and sells 40,800 Bits each year at a selling price of $37 per unit. The company's unit costs at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $10.80 4.50 3.30 4.80 ($195,840 total) 3.60 4.50 ($183,600 total) $31.50 A number of questions relating to the production and sale of Bits follow. Each question is independent. Required: 1. Assume that Ovation Company has sufficient capacity to produce 61,200 Bits each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the current 40,800 units each year if it were willing to increase the fixed selling expenses by $75,000. a. Calculate the incremental net operating income. Incremental operating income Check m