Barker Company has a single product called a Zet. The company normally produces

Question

Barker Company has a single product called a Zet. The company normally produces and sells 81,000 Zets each year at a selling price of $40 per unit. The company's unit costs at this level of activity are given below: A number of questions relating to the production and sale of Zets are given below. Each question is independent. Required: Assume that Barker Company has sufficient capacity to produce 101,250 Zets each year without any increase in fixed manufacturing overhead costs. The company could increase sales by 25% above the present 81,000 units each year if it were willing to increase the fixed selling expenses by $150,000. Calculate the incremental net operating income (Negative amount should be indicated with a minus sign. Do not round intermediate calculations.) Would the increased fixed selling expenses be justified?

Explanation / Answer

a) $56,514 b)No

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