Howe Hinges Co. manufactures and sells a single product. This product has the following operational data:
Unit sales price : $30
Variable cost per unit $18
Fixed costs: 111,000
income tax rate: 30%
How much will the sale of one additional unit add to howe's operating income? (pretax income)
Howe Hinges Co. manufactures and sells a single product. This
product has the following operational data:
Unit sales price : $30
Variable cost per unit $18
Fixed costs: 111,000
income tax rate: 30%
How much will the sale of one additional unit add to howe's operating income? (pretax income)
Contriibution margin per unit = Unit sales price - Variable cost
per unit
= $30 - $18
= $12
Sale of one additional unit = Increase in contriibution margin
Therefore, the sale of one additional unit add $12 to H's operating income.
The fixed cost remains constant, thus, it should not be considered.
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