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 28,000 additional Sun Sound and 30,000 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows: Sun Sound Ear Bling Headphones Headphones Sales price $140.00 $125.00 Variable cost of goods sold (78.40) (70.00) Manufacturing margin $61.60 $55.00 (28.00) Variable selling and administrative expenses (25.00) Contribution margin $33.60 $30.00 Fixed manufacturing costs (14.00) (12.50) $19.60 $17.50 Operating income Prepare an analysis indicating the increase or decrease in total profitability if 28,000 additional Sun Sound and 30,000 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 place. Head Pops Inc. Analysis Sun Sound Headphones Ear Bling Headphones Unit volume increase x Contribution margin per unit Increase in profitability
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 28,000 additional Sun Sound and 30,000 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows: Sun Sound Ear Bling Headphones Headphones Sales price $140.00 $125.00 Variable cost of goods sold (78.40) (70.00) Manufacturing margin $61.60 $55.00 (28.00) Variable selling and administrative expenses (25.00) Contribution margin $33.60 $30.00 Fixed manufacturing costs (14.00) (12.50) $19.60 $17.50 Operating income Prepare an analysis indicating the increase or decrease in total profitability if 28,000 additional Sun Sound and 30,000 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 place. Head Pops Inc. Analysis Sun Sound Headphones Ear Bling Headphones Unit volume increase x Contribution margin per unit Increase in profitability
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 28,000 additional Sun Sound and 30,000 additional Ear Bling headphones could
be sold. The operating income by unit of product is as follows:
Sun Sound
Ear Bling
Headphones Headphones
Sales price
$140.00
$125.00
Variable cost of goods sold
(78.40)
(70.00)
Manufacturing margin
$61.60
$55.00
(28.00)
Variable selling and administrative expenses
(25.00)
Contribution margin
$33.60
$30.00
Fixed manufacturing costs
(14.00)
(12.50)
$19.60
$17.50
Operating income
Prepare an analysis indicating the increase or decrease in total profitability if 28,000 additional Sun Sound and 30,000 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 place.
Transcribed Image Text:Head Pops Inc.
Analysis
Sun Sound Headphones
Ear Bling Headphones
Unit volume increase
x Contribution margin per unit
Increase in profitability
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