Case study
This query is : Resolved
pratapchaudhary
(Querist)
12 June 2015
hi
1. Incremental Costs. Electron Control, Inc., sells voltage regulators to other manufacturers, who then
customize and distribute the products to quality assurance labs for their sensitive test equipment. The
yearly volume of output is 15,000 units. The selling price and cost per unit are shown below:
Selling price $200
Costs:
Direct material $35
Direct labor 50
Variable overhead 25
Variable selling expenses 25
Fixed selling expenses 15 150
Unit profit before tax $ 50
Management is evaluating the alternative of performing the necessary customizing to allow Electron
Control to sell its output directly to Q/A labs for $275 per unit. Although no added investment is
required in productive facilities, additional processing costs are estimated as:
Direct labor $25 per unit
Variable overhead $15 per unit
Variable selling expenses $10 per unit
Fixed selling expenses $100,000 per year
A. Calculate the incremental profit Electron Control would earn by customizing its instruments
and marketing directly to end users.
1. Incremental Costs. Electron Control, Inc., sells voltage regulators to other manufacturers, who then
customize and distribute the products to quality assurance labs for their sensitive test equipment. The
yearly volume of output is 15,000 units. The selling price and cost per unit are shown below:
Selling price $200
Costs:
Direct material $35
Direct labor 50
Variable overhead 25
Variable selling expenses 25
Fixed selling expenses 15 150
Unit profit before tax $ 50
Management is evaluating the alternative of performing the necessary customizing to allow Electron
Control to sell its output directly to Q/A labs for $275 per unit. Although no added investment is
required in productive facilities, additional processing costs are estimated as:
Direct labor $25 per unit
Variable overhead $15 per unit
Variable selling expenses $10 per unit
Fixed selling expenses $100,000 per year
A. Calculate the incremental profit Electron Control would earn by customizing its instruments
and marketing directly to end users.
Amol S Joglekar
(Expert)
12 June 2015
01. The NON pre fixed figures are assumed to be USD i.e.$
02. Can you please confirm the figure of FIXED SELLING EXPENSES....(Seems to $15 to mean total fixed selling expenses to be $225,000)
02. Can you please confirm the figure of FIXED SELLING EXPENSES....(Seems to $15 to mean total fixed selling expenses to be $225,000)
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Amol S Joglekar
(Expert)
12 June 2015
The incremental profit would be $275,000, with the assumptions cited above.
pratapchaudhary
(Querist)
12 June 2015
Please provide complete solution of this query
Amol S Joglekar
(Expert)
12 June 2015
sure no issues. Are the figures in dollars i.e. USD?????? please answer the same.
also make it convenient to give your e mail id as well as answer to my second query about fixed selling expenses....
also make it convenient to give your e mail id as well as answer to my second query about fixed selling expenses....
pratapchaudhary
(Querist)
12 June 2015
All figures in USD
My email id is pratapchaudhary91@gmail.com
My email id is pratapchaudhary91@gmail.com
Amol S Joglekar
(Expert)
13 June 2015
ok. I will send the same today or tomorrow.
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