K Change in 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 23,900 additional Sun Sound and 26,300 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 $34.40 $53.70 Variable cost of goods sold (19.30) (30.10) Manufacturing margin $15.10 $23.60 Variable selling and administrative expenses (6.90) (10.70) Contribution margin $8.20 $12.90 Fixed manufacturing costs Operating income (3.10) (4.80) $5.10 $8.10 Prepare an analysis indicating the increase or decrease in total profitability if 23,900 additional Sun Sound and 26,300 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 places. Head Pops Inc. Analysis Line Item Description Unit volume increase x Contribution margin per unit Increase in profitability Sun Sound Ear Bling Headphones Headphones
K Change in 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 23,900 additional Sun Sound and 26,300 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 $34.40 $53.70 Variable cost of goods sold (19.30) (30.10) Manufacturing margin $15.10 $23.60 Variable selling and administrative expenses (6.90) (10.70) Contribution margin $8.20 $12.90 Fixed manufacturing costs Operating income (3.10) (4.80) $5.10 $8.10 Prepare an analysis indicating the increase or decrease in total profitability if 23,900 additional Sun Sound and 26,300 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 places. Head Pops Inc. Analysis Line Item Description Unit volume increase x Contribution margin per unit Increase in profitability Sun Sound Ear Bling Headphones Headphones
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Change in 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 23,900
additional Sun Sound and 26,300 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
$34.40
$53.70
Variable cost of goods sold
(19.30)
(30.10)
Manufacturing margin
$15.10
$23.60
Variable selling and administrative expenses
(6.90)
(10.70)
Contribution margin
$8.20
$12.90
Fixed manufacturing costs
(3.10)
(4.80)
Operating income
$5.10
$8.10
Prepare an analysis indicating the increase or decrease in total profitability if 23,900 additional Sun Sound and 26,300 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 places.
Head Pops Inc.
Analysis
Line Item Description
Unit volume increase
x Contribution margin per unit
Increase in profitability
Sun Sound Ear Bling
Headphones Headphones
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