Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow....
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Accounting
Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.
Regular
Super
Total
Units
11,000
4,000
15,000
Sales revenue
$
286,000
$
800,000
$
1,086,000
Less: Cost of goods sold
188,000
480,000
668,000
Gross Margin
$
98,000
$
320,000
$
418,000
Less: Selling expenses
98,000
135,000
233,000
Operating income (loss)
$
0
$
185,000
$
185,000
Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $20 per unit for Super. Variable selling expenses are $3 per unit for Regular and $20 per unit for Super; remaining selling amounts are fixed. If Omar Industries eliminates Regular and uses the available capacity to produce and sell an additional 1,600 units of Super, what would be the impact on operating income?
Multiple Choice
A. $12,000 increase
B. $30,000 increase
C. $41,000 increase
D. $73,000 increase
E. None of the answers is correct.
Answer & Explanation
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