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

question 148

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

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Definitions:

Average Total Cost Curve

A graphical representation that shows the average cost of production per unit at different levels of output.

Technological Advance

The development and application of new technologies and techniques that improve the efficiency and productivity of manufacturing, services, or processes.

Total Product Curve

A graphical representation that shows the relationship between the total output produced by a firm and the quantity of input used, illustrating the production function.

Interest-Rate Cost-Of-Funds

The expense associated with borrowing money, typically expressed as a percentage rate, impacting the cost of accessing funds for lending or investment.