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

question 134

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:

Budgeted Cost

An estimated financial plan for expenditures over a specified period, often used for controlling costs.

Inventory Planning

The method of identifying the best amount and schedule of inventory to ensure it matches up with sales and production capabilities.

Cash Payments

The outflow of cash to settle obligations, such as expenses or the purchase of assets.

Company Data

Information and metrics related to the operations, performance, and financials of a company.