Selling price $215 $230 Direct materials (pounds) 23,000 25,000 Direct materials costs per pound $30 $32 Manufacturing capacity for CM5 (units) 11,000 11,000 Conversion costs (fixed costs) $770,000 $803,000 Conversion costs per unit of capacity $70 $73 Manufacturing conversion costs in each year depend on production capacity defined in terms of CM5 units that can be produced. Required: What is the net effect on operating income as a result of the growth component? $51,000 $116,800 $112,000 $166,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Selling price
$215
$230
Direct materials (pounds)
23,000
25,000
Direct materials costs per pound
$30
$32
Manufacturing capacity for CM5 (units)
11,000 11,000
Conversion costs (fixed costs)
$770,000 $803,000
Conversion costs per unit of capacity
$70
$73
Manufacturing conversion costs in each year depend on production capacity defined
in terms of CM5 units that can be produced.
Required:
What is the net effect on operating income as a result of the growth component?
$51,000
$116,800
$112,000
$166,000
Transcribed Image Text:Selling price $215 $230 Direct materials (pounds) 23,000 25,000 Direct materials costs per pound $30 $32 Manufacturing capacity for CM5 (units) 11,000 11,000 Conversion costs (fixed costs) $770,000 $803,000 Conversion costs per unit of capacity $70 $73 Manufacturing conversion costs in each year depend on production capacity defined in terms of CM5 units that can be produced. Required: What is the net effect on operating income as a result of the growth component? $51,000 $116,800 $112,000 $166,000
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