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Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase variable costs for all sprinklers by an average of $0.71 per unit. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average sales price would increase $0.25 per unit. Waterways currently sells 491,740 sprinkler units at an average selling price of $26.50. The manufacturing costs are $6,863,512 variable and $2,050,140 fixed. Selling and administrative costs are $2,661,352 variable and $794,950 fixed.

(1) If Waterways begins mass-producing its special-order sprinklers, how would this affect the company?

(2) If the average sales price per sprinkler unit did not increase when the company began mass-producing the special-order sprinkler, what would be the effect on the company?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9976195

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