Head Pops Inc. manufactures two models of solar-powered, noise-canceling headphones: Sun Sound and Ear Bling models. The company is operating at less than full capacity. Market research indicates that 28,700 additional Sun Sound and 31,600 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows:   Sun SoundHeadphones Ear BlingHeadphones Sales price $37.50    $58.50    Variable cost of goods sold (21.00)   (32.80)   Manufacturing margin $16.50    $25.70    Variable selling and administrative expenses (7.50)   (11.70)   Contribution margin $9.00    $14.00    Fixed manufacturing costs (3.40)   (5.30)   Operating income $5.60    $8.70    Prepare an analysis indicating the increase or decrease in total profitability if 28,700 additional Sun Sound and 31,600 additional Ear Bling headphones are produced and sold, assuming that there is sufficient capacity for the additional production. Round your per unit answers to two decimal place. Head Pops Inc. Analysis     Sun Sound Headphones Ear Bling Headphones Unit volume increase     x Contribution margin per unit $ $ Increase in profitability $ $

Question

Head Pops Inc. manufactures two models of solar-powered, noise-canceling headphones: Sun Sound and Ear Bling models. The company is operating at less than full capacity. Market research indicates that 28,700 additional Sun Sound and 31,600 additional Ear Bling headphones could be sold. The operating income by unit of product is as follows:

  Sun Sound
Headphones
Ear Bling
Headphones
Sales price $37.50    $58.50   
Variable cost of goods sold (21.00)   (32.80)  
Manufacturing margin $16.50    $25.70   
Variable selling and administrative expenses (7.50)   (11.70)  
Contribution margin $9.00    $14.00   
Fixed manufacturing costs (3.40)   (5.30)  
Operating income $5.60    $8.70   

Prepare an analysis indicating the increase or decrease in total profitability if 28,700 additional Sun Sound and 31,600 additional Ear Bling headphones are produced and sold, assuming that there is sufficient capacity for the additional production. Round your per unit answers to two decimal place.

Head Pops Inc.
Analysis
 
  Sun Sound Headphones Ear Bling Headphones
Unit volume increase    
x Contribution margin per unit $ $
Increase in profitability $ $

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