SalesVariable CostsContribution MarginFixed CostsOperating IncomeTotal at 2,000 UnitⓇer Unit800,000321,000479,000182,000279,000400160.50239.50 3) If demand for 2022 is instead 2,500 units should the company pay to increase their capacity? Why? Please explain yourcalculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept ofincremental profits.Hint: If you expand capacity, you will have to pay additional fixed costs of $25,000. Remember that fixed costs are fixed within therelevant range. If you expand capacity then you are outside this range. If you expand capacity then you can make revenue on 500additional units at the normal price and would pay variable costs on 500 additional units. Please consider the incremental profit or lossof expanding capacity. The incremental profit is the increase in revenues minus the increase in costs of adding 500 more units. If theincremental profit of expanding capacity is positive then you should do so.

Incremental analysis is a technique used by business for better decision making. It is also known as…

If demand for 2022 is instead 2,500 units should the company pay to increase their capacity? Why? Please explain your calculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept of incremental profits.

If demand for 2022 is instead 2,500 units should the company pay to increase their capacity? Why? Please explain your calculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept of incremental profits.

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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