Estimated Demand 43,000 Units 43,000 Units Est. Sales Price $27.000 $54.00 Est. Cost per unit Dir. Materials $2.50 $2.75 Dir. Labor $3.00 $6.00 Var. Manufacturing OH $3.00 $6.25 Fixed Man. OH $3.00
CD Only CD With Instructional Materials
Estimated Demand 43,000 Units 43,000 Units
Est. Sales Price $27.000 $54.00
Est. Cost per unit
Dir. Materials $2.50 $2.75
Dir. Labor $3.00 $6.00
Var. Manufacturing OH $3.00 $6.25
Fixed Man. OH $3.00 $3.00
Unit Man. Cost $11.50 $18.00
Additional Development Cost $125,000
Based on the given data, compute the increase or decrease in profit that would result if instructional materials were added to the CD's.
Cd's Only CD's with instrumental Materials Incremental
Sales Revenue $1,161,000 $2,322,000 $1,161,000
Variable Costs ? ? ?
Contribution margin
Additional Development Costs ? ? ?
Differential
| CD's Only | CD's with instrumental Materials | Incremental | |
| Sales Units | 43000 | 43000 | |
| Sales Price | 27 | 54 | |
| Sales Revenue | 1161000 | 2322000 | 1161000 |
| Variable Costs : | |||
| - Direct materials |
107500 (43000*2.5) |
118250 (43000*2.75) |
10750 |
| - Direct Labor |
129000 (43000*3) |
258000 (43000*6) |
129000 |
| - Variable Manufacturing OH |
129000 (43000*3) |
268750 (43000*6.25) |
139750 |
| Total Variable Costs | 365500 | 645000 | 279500 |
| Additional Development Costs | 125000 | 125000 | |
| Differential Profit (Loss) | 756500 |
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