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

question 118

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 Q?

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Definitions:

Articles of Incorporation

A document that establishes the existence of a corporation and includes fundamental details like the corporation's name, purpose, and structure.

Volume of Business

The total amount of business conducted within a specific period, often measured in terms of sales numbers or transactions.

Defendant

A person or entity against whom a lawsuit is filed in a court of law.

Summons

A legal document issued by a court and addressed to a defendant that notifies him or her of a lawsuit and specifies how and when to respond to the complaint. A summons may be used in both civil and criminal proceedings.