Head Pops Inc. manufactures two models of solar-powered, noise-canceling headpho

Question

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 17,700 additional Sun Sound and 19,600 additional Ear Bling headphones could be sold. The income from operations by unit of product is as follows: Sun Sound Headphones Ear Bling Headphones Sales price $34.30 $53.50 Variable cost of goods sold 19.20 30.00 Manufacturing margin $15.10 $23.50 Variable selling and administrative expenses 6.90 10.70 Contribution margin $8.20 $12.80 Fixed manufacturing costs 3.10 4.80 Income from operations $5.10 $8.00 Prepare an analysis indicating the increase or decrease in total profitability if 17,700 additional Sun Sound and 19,600 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 Headphone Ear Bling Headphone Unit volume increase x Contribution margin per unit $ $ Increase in profitability $ $

Explanation / Answer

Sun Sound Headphone Ear Bling Headphone Unit volume increase 17700 19600 Contribution margin per unit 8.2 12.8 Increase in profitability 145140 250880

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