Change in Contribution MarginHead Pops Inc. manufactures two models of solar-powered, noise-canceling headphones: Sun Sound and Ear Bling models. The company is operating at less than full capacity. Marketresearch indicates that 30,600 additional Sun Sound and 34,000 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows:Sun Sound Ear BlingHeadphones HeadphonesSales price$31.60$49.30Variable cost of goods sold(17.70)(27.60)Manufacturing margin$13.90$21.70Variable selling and administrative expenses(6.30)(9.90)Contribution margin$7.60$11.80Fixed manufacturing costs(2.80)(4.40)Operating income$4.80$7.40Prepare an analysis indicating the increase or decrease in total profitability if 30,600 additional Sun Sound and 34,000 additional Ear Bling headphones are produced and sold,assuming that there is sufficient capacity for the additional production. Round your per unit answers to two decimal places.Head Pops Inc.AnalysisSun Sound Ear BlingHeadphones HeadphonesLine Item DescriptionUnit volume increase× Contribution margin per unit $Increase in profitability

Step 1: Therefore an increase in profitability due to additional units will be equal to the…

Answered: Change in Contribution Margin Head Pops…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Change in Sales Mix and Contribution Margin Head Pops Inc. manufactures two models of solar-powered, noise-canceling headphones: Sun Sound and Ear Bling models. The company is operating at less than full capacity. Market research indicates that 33,600 additional Sun Sound and 36,600 additional Ear Bling headphones could be sold. The income from operations by unit of product is as follows: Sun SoundHeadphones Ear BlingHeadphones Sales price $34.10 $53.20 Variable cost of goods sold 19.10 29.80 Manufacturing margin $15.00 $23.40 Variable selling and administrative expenses 6.80 10.60 Contribution margin $8.20 $12.80 Fixed manufacturing costs 3.10 4.80 Income from operations $5.10 $8.00 Prepare an analysis indicating the increase or decrease in total profitability if 33,600 additional Sun Sound and 36,600 additional Ear Bling headphones are produced and sold, assuming that there is sufficient capacity for the additional production. Round…
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Change in Contribution Margin Head Pops Inc. manufactures two models of solar-powered, noise-canceling headphones: Sun Sound and Ear Bling models. The company is operating at less than full capacity. Market research indicates that 29,400 additional Sun Sound and 32,300 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows: Sales price Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed manufacturing costs Operating income Head Pops Inc. Analysis Line Item Description Unit volume increase x Contribution margin per unit Increase in profitability Sun Sound Ear Bling Headphones Headphones $29.80 $46.50 (16.70) (26.00) $13.10 $20.50 (6.00) $7.10 (2.70) $4.40 Prepare an analysis indicating the increase or decrease in total profitability if 29,400 additional Sun Sound and 32,300 additional Ear Bling headphones are produced and sold, assuming that there is sufficient capacity for…
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