Reference no: EM1333329
Infinite Audio, Inc., manufactures car speakers which it sells to other resellers, who then customize and distribute the products to retailers which sell hi-fi auto equipment. The yearly volume of output is 300,000 pairs. The selling price and cost per unit are shown below:
Selling price $150
Costs:
Direct material $25
Direct labor 45
Variable overhead 20
Variable selling expenses 15
Fixed selling expenses 10 115
Unit profit before tax $ 35
Management is evaluating the alternative of performing the necessary customizing to allow Infinite Audio to sell its output directly to car stereo retailers for $200 per unit under an in-house marquee. Although no added investment is required in productive facilities, additional processing costs are estimated as:
Direct labor $20 per unit
Variable overhead $15 per unit
Variable selling expenses $10 per unit
Fixed selling expenses $300,000 per year
Calculate the incremental profit Infinite Audio would earn by customizing its instruments and marketing directly to end users.
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: Infinite Audio, Inc., manufactures car speakers which it sells to other resellers, compute the incremental profit Infinite Audio would earn by customizing its instruments and marketing directly to end users.
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