Question

28. Mr. Time Co manufactures titanium watches and sells them to retailers in the area. Mr. Time Co was able to find a vendor who was willing to reduce the price of titanium. Since the direct material cost per unit decreased, Mr. Time Co decided to lower the price per unit and move to a larger warehouse in order to be able to satisfy the expected increase in demand. Information about the current period with the previous period follows: 2017 2018 1 Total number of watches produced and sold 2880 3570 2 Selling price $25 $24 3 Total titanium used (pounds) 180lbs 278.9lbs 4 cost per pound of titanium $35 $34 5 Manufacturing capacity in titanium processed 300lbs 400lbs 6 Total conversion costs $15,500 $17,500 7 Selling and customer service capacity 30 customers 35 customers 8 Selling and customer service cost $30,000 $32,000 How much was the change in operating income from the previous period to the current period once the changes took effect? (Please round all answers)

Answer 1

	2017	2018
Sales	$   72,000.00	$   85,680.00
Costs:
Materials	$     6,300.00	$     9,482.60
Conversion costs	$   15,500.00	$   17,500.00
Selling costs	$   30,000.00	$   32,000.00
Total costs	$   51,800.00	$   58,982.60
Net profit	$   20,200.00	$   26,697.40
Less: 2017 profit		$ (20,200.00)
Increase in profit		$     6,497.40