Roadrunner Manufacturing Produces Item Q with Variable Manufacturing Costs of $16/unit.The

question 21

Essay

Roadrunner Manufacturing produces Item Q with variable manufacturing costs of $16/unit.The selling price of Item Q is $20/unit.The fixed manufacturing overhead cost is $75,000.A normal production run includes 150,000 units.Roadrunner Manufacturing has discovered an additional process to change Item Q into Item QR.Additional costs are estimated at $3/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?

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Definitions:

Social Security Tax

A payroll tax that funds the Social Security program, which provides benefits for retirees, disabled persons, and survivors.

Medicare Tax

A federal tax deducted from employees' wages and matched by employers to fund the Medicare program, providing health insurance for individuals over 65.

Unemployment Compensation Tax

A tax paid by employers based on the wages of their employees, used to fund the unemployment insurance program.

Social Security Tax

Mandatory contributions collected from employees and employers to fund the Social Security program, providing benefits for retirees, the disabled, and survivors.