Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with

the Salem brand name. Owner Kenneth Booth was interested in the possibility. Before any commitment was made, however, Kenneth wanted to know what the incrementalfixed costs would

be and how many radios must be sold to cover these costs.

In response, Betty Johnson, the marketing manager, gathered data for the current products

to help in projecting overhead costs for the new product. The overhead costs based on 30,000

direct labor hours follow. (The high-low method using direct labor hours as the independent

variable was used to determine thefixed and variable costs.)

Fixed Variable

Materials handling $