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 26,800 additional Sun Sound and 29,700 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows: Sun Sound Headphones Ear Bling Headphones Sales price $35.60 $55.50 Variable cost of goods sold (19.90) (31.10) Manufacturing margin $15.70 $24.40 Variable selling and administrative expenses (7.10) (11.10) Contribution margin $8.60 $13.30 Fixed manufacturing costs (3.20) (5.00) Operating income $5.40 $8.30 Prepare an analysis indicating the increase or decrease in total profitability if 26,800 additional Sun Sound and 29,700 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 fill in the blank 1 fill in the blank 2 x Contribution margin per unit $fill in the blank 3 $fill in the blank 4 Increase in profitability $fill in the blank 5 $fill in the blank 6

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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 26,800 additional Sun Sound and 29,700 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows:

	Sun Sound Headphones	Ear Bling Headphones
Sales price	$35.60		$55.50
Variable cost of goods sold	(19.90)		(31.10)
Manufacturing margin	$15.70		$24.40
Variable selling and administrative expenses	(7.10)		(11.10)
Contribution margin	$8.60		$13.30
Fixed manufacturing costs	(3.20)		(5.00)
Operating income	$5.40		$8.30

Prepare an analysis indicating the increase or decrease in total profitability if 26,800 additional Sun Sound and 29,700 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	fill in the blank 1	fill in the blank 2
x Contribution margin per unit	$fill in the blank 3	$fill in the blank 4
Increase in profitability	$fill in the blank 5	$fill in the blank 6

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