Miller Company produces speakers for home stereo units.The speakers are sold to retail stores for $30.Manufacturing and other costs are as follows: The variable distribution costs are for transportation to the retail stores.The current production and sales volume is 20,000 per year.Capacity is 25,000 units per year.
The speakers are currently unpackaged.Packaging them individually would increase costs by $1.20 per unit.However, the units could then be sold for $33.00.All other information remains the same as the original data.
-What is the effect on profits if Miller Company packages the speakers?
A) decrease of $36,000
B) decrease of $24,000
C) increase of $36,000
D) no change

Question

Miller Company produces speakers for home stereo units.The speakers are sold to retail stores for $30.Manufacturing and other costs are as follows:  The variable distribution costs are for transportation to the retail stores.The current production and sales volume is 20,000 per year.Capacity is 25,000 units per year.
The speakers are currently unpackaged.Packaging them individually would increase costs by $1.20 per unit.However, the units could then be sold for $33.00.All other information remains the same as the original data.
-What is the effect on profits if Miller Company packages the speakers?
A) decrease of $36,000 
B) decrease of $24,000 
C) increase of $36,000 
D) no change

Quizplus · Accepted Answer

If Miller Company packages the speakers, it will save $36,000 in packaging costs. This will increase profits by $36,000.

Miller Company Produces Speakers for Home Stereo Units