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Pharoah Chemical Corporation produces an oil-based chemical product which it sells to paint manufacturers. In 2022, the company incurred $309,600 of costs to produce 36,000 gallons of the chemical. The selling price of the chemical is $10.00 per gallon. The costs per unit to manufacture a gallon of the chemical are presented below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs $4.00 1.00 The company is considering manufacturing the paint itself. If the company processes the chemical further and manufactures the paint itself, the following additional costs per gallon will be incurred: Direct materials $1.50, Direct labor $0.40, Variable manufacturing overhead $0.30. No increase in fixed manufacturing overhead is expected. The company can sell the paint at $13.50 per gallon. Net incremental income per unit 0.60 0.40 $6.00 Determine the incremental per gallon increase in net income and the total increase in net income if the company manufactures the paint. (Round net income per unit value to 2 decimal places, e.g. 15.25.) Incremental net income $ $ per unit

Pharoah Chemical Corporation produces an oil-based chemical product which it sells to paint manufacturers. In 2022, the company incurred $309,600 of costs to produce 36,000 gallons of the chemical. The selling price of the chemical is $10.00 per gallon. The costs per unit to manufacture a gallon of the chemical are presented below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs $4.00 1.00 The company is considering manufacturing the paint itself. If the company processes the chemical further and manufactures the paint itself, the following additional costs per gallon will be incurred: Direct materials $1.50, Direct labor $0.40, Variable manufacturing overhead $0.30. No increase in fixed manufacturing overhead is expected. The company can sell the paint at $13.50 per gallon. Net incremental income per unit 0.60 0.40 $6.00 Determine the incremental per gallon increase in net income and the total increase in net income if the company manufactures the paint. (Round net income per unit value to 2 decimal places, e.g. 15.25.) Incremental net income $ $ per unit

FINANCIAL ACCOUNTING
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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Pharoah Chemical Corporation produces an oil-based chemical product which it sells to paint manufacturers. In 2022, the company incurred $309,600 of costs to produce 36,000 gallons of the chemical. The selling price of the chemical is $10.00 per gallon. The costs per unit to manufacture a gallon of the chemical are presented below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs $4.00 1.00 The company is considering manufacturing the paint itself. If the company processes the chemical further and manufactures the paint itself, the following additional costs per gallon will be incurred: Direct materials $1.50, Direct labor $0.40, Variable manufacturing overhead $0.30. No increase in fixed manufacturing overhead is expected. The company can sell the paint at $13.50 per gallon. Net incremental income per unit 0.60 0.40 $6.00 Determine the incremental per gallon increase in net income and the total increase in net income if the company manufactures the paint. (Round net income per unit value to 2 decimal places, e.g. 15.25.) Incremental net income $ $ per unit
Transcribed Image Text:Pharoah Chemical Corporation produces an oil-based chemical product which it sells to paint manufacturers. In 2022, the company incurred $309,600 of costs to produce 36,000 gallons of the chemical. The selling price of the chemical is $10.00 per gallon. The costs per unit to manufacture a gallon of the chemical are presented below: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs $4.00 1.00 The company is considering manufacturing the paint itself. If the company processes the chemical further and manufactures the paint itself, the following additional costs per gallon will be incurred: Direct materials $1.50, Direct labor $0.40, Variable manufacturing overhead $0.30. No increase in fixed manufacturing overhead is expected. The company can sell the paint at $13.50 per gallon. Net incremental income per unit 0.60 0.40 $6.00 Determine the incremental per gallon increase in net income and the total increase in net income if the company manufactures the paint. (Round net income per unit value to 2 decimal places, e.g. 15.25.) Incremental net income $ $ per unit
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