# Calculating Incremental profits

Universal Audio manufactures car speakers that it sells to other resellers that then customize and distribute the product to retailers that sell hi-fi auto equipment. The yearly volume of output is 300,000 pairs. The selling price and cost per unit are shown below:

Selling price \$150
Costs:
Direct material \$25
Direct labor \$45
Variable selling expenses \$15
Fixed selling expenses \$100,000
Unit profit before tax \$35

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Management is evaluating the alternative of performing the necessary customizing to allow Universal Audio to sell its output directly to car stereo retailers for \$200 per unit under an in-house label. Although no added investment in productive facilities is required, additional processing costs are estimated to be:

Direct labor \$20 per unit
Variable selling expenses \$10 per unit
Fixed selling expenses \$300,000 per year

(A) Calculate the incremental profit that Universal Audio would earn by customizing its instruments and marketing directly to end users.

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Solution describes the steps for calculating incremental profit if company decides to sell their products directly to retailers.To continue with the answer click on mycoursewriter.com/

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