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 25,000 additional Sun Sound and 27,500 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 $28.00 $43.70 Variable cost of goods sold (15.70) (24.50) Manufacturing margin $12.30 $19.20 Variable selling and administrative expenses (5.60) (8.70) Contribution margin $6.70 $10.50 Fixed manufacturing costs (2.50) (3.90) Operating income $4.20 $6.60

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 25,000 additional Sun Sound and 27,500 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 $28.00 $43.70 Variable cost of goods sold (15.70) (24.50) Manufacturing margin $12.30 $19.20 Variable selling and administrative expenses (5.60) (8.70) Contribution margin $6.70 $10.50 Fixed manufacturing costs (2.50) (3.90) Operating income $4.20 $6.60

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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