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Calculate operating income for monster trucks

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Reference no: EM131772508

Monster Trucks Inc. is a medium-sized toy manufacturer that makes RC (radio-controlled) truck toys. Monster Trucks operates in a highly competitive industry against some very large toy manufacturers such as Mattel and Hasbro. To compete effectively in this industry

Monster must keep costs low while keeping quality high. The following information has been gathered for Monster Trucks for 2009 and 2010.

 

 

2010

 

2009

Toys made

4,800

3,950

Plant capacity

6,000

6,000

# of Toys scrapped

120

142

Selling price

$45

$42.50

DM Cost per unit

$15

$13

Direct labour hours

2500

2150

Conversion costs

$50,000

$42,500

Selling and administrative costs

$18,000

$17,000

# of Research staff

2

2

R&D Costs

$38,000

$42,000

Conversion costs for Monster Trucks are made up of direct labour and overhead costs. Direct labour is charged at a rate of $10 per hour. All overhead costs are fixed.

Required:

1. Calculate operating income for Monster Trucks for both 2009 and 2010.

Reference no: EM131772508

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