Please read the case study given below and answer the problems given. Case Study Electron Control, Inc., sells voltage regulators to other manufacturers, who then customize and distribute the products to quality assurance labs for their sensitive test equipment. The yearly volume of output is 15,000 units. The selling price and cost per unit are illustrated below: Selling price $200 Costs: Direct material $35 Direct labor 50 Variable overhead 25 Variable selling expenses 25 Fixed selling expenses 15 150 Unit profit before tax $ 50 Management is computing the alternative of performing the essential customizing to allow Electron Control to sell its output directly to Q/A labs for $275 per unit. Though no added investment is needed in productive facilities, additional processing costs are estimated as: Direct labor $25 per unit Variable overhead $15 per unit Variable selling expenses $10 per unit Fixed selling expenses $100,000 per year.
problem 1: Compute the incremental profit Electron Control would earn by customizing its instruments and marketing directly to the end users.