Electron control, inc sells voltage regulates to other manufactures who then customize and distrivbutes the production to quality assurance lab for their sensitive test equipments . the yearly volume of output is 15000 unit .. the selling price and cost per unit are shown below.:
Selling price $200
Cost $35
Direct labour 50
Variable overhead 25
Variable selling expensive 25
Fixed selling expenses 15 150
Unit profit before tax $ 50
Management is evaluating the alternative of performing the necessary customizing to allow electron control to sell its output directly to Q/A labs for $275 per unit . although no added investment is required in productive facilities additional processing cost are estimated as :
Direct labour $25 per unit
Variable overhed $15 per unit
Variable selling expensive $10 per unit
Fixed selling expenses $ 100000 per year
Calculate the incremental profit electron control would earn by customizing its instruments and marketing directly to end user