Duo, Inc., carries two products and has the following year-end income statement (000s omitted):

If products AR-10 and ZR-7 are substitutes for each other, a sales mix and sales volume variation for the combined products can be calculated. If this combination is calculated, then what would be the net effect on profit of the change in the unit sales mix?

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Product AR-10 Product ZR-7 Budget Actual Budget Actual Units 2,000 2,800 6,000 5,600 Sales $ $ 6,000 $ 7,560 $ 12,000 $ 11,760 Variable costs 2,400 2,800 6,000 5,880 Fixed Costs 1,800 1,900 2,400 2,400 Total Costs $ 4,200 $ 4,700 $ 8,400 $ 8,280 Operating income $ 1,800 $ 2,860 $ 3,600 $ 3,480 Product AR-10 Product ZR-7 Budget Actual Budget Actual Units 2,000 2,800 6,000 5,600 Sales $ $ 6,000 $ 7,560 $ 12,000 $ 11,760 Variable costs 2,400 2,800 6,000 5,880 Fixed Costs 1,800 1,900 2,400 2,400 Total Costs $ 4,200 $ 4,700 $ 8,400 $ 8,280 Operating income $ 1,800 $ 2,860 $ 3,600 $ 3,480

Answer rating: 100% (QA)

To calculate the net effect on profit of the change in the unit sales mix we need to compare the ope... View the full answer