Heinz Manufacturing Produces Item Q with Variable Manufacturing Costs of $12/unit

question 204

Essay

Heinz Manufacturing produces Item Q with variable manufacturing costs of $12/unit. The selling price of Item Q is $15/unit. The fixed manufacturing overhead cost is $72,000. A normal production run includes 100,000 units. Heinz Manufacturing has discovered an additional process to change Item Q into Item QR. Additional costs are estimated at $7/unit. Item QR would sell for $24/unit. Additional fixed manufacturing overhead costs of $4,500 would be incurred if Item QR is produced. There would be no change in the number of units produced.
What would be the operating income for Item QR?

Develop proficiency in calculating average costs per unit for variable and fixed cost components within the relevant range.

Understand and apply the concept of sunk cost, opportunity cost, and differential cost in business decisions.

Calculate the net operating income using the contribution approach.

Develop equations for cost formulas based on variable and fixed components.

---

Definitions:

Polychronic

Describes cultures or individuals that manage multiple tasks simultaneously, valuing flexibility and fluidity in time management.

Low Long-term Oriented

Characterizes cultures or individuals that prioritize immediate results and gratification over long-term achievements.

High Power Distance

A cultural dimension indicating a society's acceptance of unequal power distribution among its members and institutions.

Bias-free Photos

Images captured or selected without prejudice, ensuring representation and neutrality without influencing viewer perception through bias.