Question
Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase unit variable costs for all sprinklers by an average of
Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase unit variable costs for all sprinklers by an average of $0.70. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average unit sales price would increase $0.20. Waterways currently sells 491,740 sprinkler units at an average unit selling price of $26.50. The manufacturing costs are $6,863,512 variable and $2,050,140 fixed. Selling and administrative costs are $2,651,657 variable and $794,950 fixed. If Waterways begins mass-producing its special-order sprinklers, how would this affect the company? (Round ratio answers to 0 decimal places, e.g. 5% and net income answers to 2 decimal places, e.g. 5,275.25.)
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