Hobart Company Produces Speakers for PA Systems The Variable Distribution Costs Are for Transportation to the Retail

Multiple Choice

Hobart Company produces speakers for PA systems. The speakers are sold to retail music stores for $30. Manufacturing and other costs are as follows: $\begin{array}{lrcr}\text { Variable costs per unit: } & &{\text { Fixed costs per month: }} \\\text { Direct materials } & \$ 9.00 & \text { Factory overhead } & \$ 120,000 \\\text { Direct labor } & 4.50 & \text { Selling and admin. } & 60,000 \\\text { Factory overhead } & 3.00 & \text { Total } & \$ 180,000\\\text { Distribution } & 1.50 \\\text { Total } & \$ 18.00\end{array}$ The variable distribution costs are for transportation to the retail music stores. The current production and sales volume is 20,000 per year. Capacity is 25,000 units per year.
The speakers are currently unpackaged. Packaging them individually would increase costs by $1.20 per unit. However, the units could then be sold for $33.00. All other information remains the same as the original data. What is the effect on profits if Hobart Company packages the speakers?

A) no change
B) decrease of $24,000
C) decrease of $36,000
D) increase of $36,000