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?

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Definitions:

Time Pressure

The stress experienced by individuals due to perceived insufficient time to complete tasks or meet deadlines.

Conflict Management

Conflict Management is the practice of identifying and handling conflicts in a sensible, fair, and efficient manner.

Marketing Orientation

A business approach that prioritizes identifying and meeting the needs and wants of its customers through its product mix.

Dysfunctional Conflict

A type of conflict that hinders organizational performance, employee satisfaction, or causes long-lasting negativity within groups.