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Howe Hinges Co. manufactures and sells a single product. This product has the following operational data:...

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)

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Answer #1

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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