Question

Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be cooked and sold. Wings, breading, and sauce $4,900 Direct labor (Variable) 3,500 Rent 1,100 Depreciation 900 Other fixed costs 400 Each wing sells for $0.80 each. How much would Hurricane Wing’s profit increase if 100 more wings were sold?

Answer 1

Answer:

Profit increase= $45

Explanation:

Giving the following information:

Q= 24,000 wings will be cooked and sold.

Wings, breading, and sauce $4,900

Direct labor (Variable) 3,500

Rent 1,100

Depreciation 900

Other fixed costs 400

Each wing sells for $0.80 each.

First, we need to calculate the unitary variable cost:

Wings, breading, and sauce= 4900/24000= 0.2042

Direct labor= 3500/24000= 0.1458

Total variable cost= 0.35

Now, we can calculate the increase in profit:

Q increase= 100 units

Profit increase= marginal contribution*100

Profit increase= (0.80-0.35)*100= $45