Differential analysis, Managerial Accounting

Barker Company has a single product called a Zet. The company normally produces and sells 80,000 Zets each year at a selling price of $40 per unit. The company’s unit costs at this level of activity are given below:

Direct materials $ 9.50
Direct labor 10.00
Variable manufacturing overhead 2.80
Fixed manufacturing overhead 5.00 ($400,000 total)
Variable selling expenses 1.70
Fixed selling expenses 4.50 ($360,000 total)



Total cost per unit $ 33.50






A number of questions relating to the production and sale of Zets are given below. Each question is

Assume that Barker Company has sufficient capacity to produce 100,000 Zets each year without any increase in fixed manufacturing overhead costs. The company could increase sales by 25% above the present 80,000 units each year if it were willing to increase the fixed selling expenses by $150,000.
a. Calculate the incremental net operating income. (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

Incremental net operating income $
Posted Date: 11/20/2012 10:02:41 PM | Location : United States

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