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Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow....

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Accounting

Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

Regular Super Total
Units 11,000 4,000 15,000
Sales revenue $ 286,000 $ 800,000 $ 1,086,000
Less: Cost of goods sold 188,000 480,000 668,000
Gross Margin $ 98,000 $ 320,000 $ 418,000
Less: Selling expenses 98,000 135,000 233,000
Operating income (loss) $ 0 $ 185,000 $ 185,000

Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $20 per unit for Super. Variable selling expenses are $3 per unit for Regular and $20 per unit for Super; remaining selling amounts are fixed. If Omar Industries eliminates Regular and uses the available capacity to produce and sell an additional 1,600 units of Super, what would be the impact on operating income?

Multiple Choice

A. $12,000 increase

B. $30,000 increase

C. $41,000 increase

D. $73,000 increase

E. None of the answers is correct.

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