Question - Phoenix-based CompTronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets:
Sales: $4,032,000
Variable costs: 1,008,000
Fixed costs: 2,736,000
Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $21.60 per set; annual fixed costs are anticipated to be $2,380,800. (In the following requirements, ignore income taxes.)
Required - Determine the effect of an increase in fixed administrative costs on the unit contribution margin.