Signature pen company manufactures ballpoint and fountain

Reference no: EM13600947

Signature Pen Company manufactures ballpoint and fountain pens and is operating at less than full capacity. Market research indicates that 6,000 additional ballpoint pens and 8,500 additional pens could be sold. The income from operations by unit of product is as follows:

Ballpoint pen Fountain Pen
Sales price $5.50 $15.00
Variable cost of goods 2.80 8.30
Manufacturing margin $2.70 $6.70
Variable selling and administrative expenses 1.10 2.80
Contribution margin $1.60 $3.90
Fixed manufacturing costs 0.50 1.00
Income from operations $1.10 $2.90

Prepare an analysis indicating the increase or decrease in total profitability if 6,000 additional ballpoint pens and 8,500 additional fountain pens are produced and sold, assuming that there is sufficient capacity for the additional production.

Reference no: EM13600947

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