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

question 93

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.
By what percent would Heinz Manufacturing's operating income improve if the change is made?

---

Definitions:

Fourth Amendment

A provision in the United States Constitution protecting citizens against unreasonable searches and seizures by the government.

Foreign Corporation

A business entity that is registered and operates in a different country from where it was originally incorporated.

Certificate of Authority

An official document granting a company the right to conduct its business in a jurisdiction outside of where it was originally incorporated.

Transact Business

Transact Business refers to the conduct of commercial, professional, or other routine operations between parties.