Answer:
There is a financial advantage of $ 1,240,240
Explanation:
<u>Incremental Costs and Revenues will be as follows</u>
Increment in sales = 87,000 units × 40% = 34,800 units
Selling Price (34,800 units × $60 per unit) 2,088,000
<em>Less Cost of Sales </em><em> </em> (643,800)
<em>Direct materials </em>( $ 7.50 × 34,800 units ) 261,000
Direct labor ( $ 8.00 × 34,800 units ) 278,400
Variable manufacturing overhead ( $ 3.00 × 34,800 units ) 104,400
Contribution 1,444,200
Less Expenses
Variable selling expenses ( $ 2.70 × 34,800 units ) (93,960)
Fixed Selling Expenses (110,000)
Net Income 1,240,240
<u>Conclusion</u>
There is a financial advantage of $ 1,240,240 of investing an additional $110,000 in fixed selling expenses.