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Assume a company is considering adding a new product line with the following estimated cost and revenue data: Annual sales Selling price per unit Variable manufacturing costs per unit Variable selling costs per unit Incremental fixed manufacturing costs Incremental fixed selling costs 6,000 $ 180 $ 140 $ 15 $ 65,000 $ 40,000 units per year per year

Assume a company is considering adding a new product line with the following estimated cost and revenue data: Annual sales Selling price per unit Variable manufacturing costs per unit Variable selling costs per unit Incremental fixed manufacturing costs Incremental fixed selling costs 6,000 $ 180 $ 140 $ 15 $ 65,000 $ 40,000 units per year per year

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume a company is considering adding a new product line with the following estimated cost and revenue data: Annual sales 6,000 Selling price per unit $ 180 Variable manufacturing costs per unit $ 140 Variable selling costs per unit $ 15 Incremental fixed manufacturing costs $ 65,000 Incremental fixed selling costs $ 40,000 Allocated common fixed administrative costs $ 45,000 units per year per year per year If the new product line is added, the company expects that it will increase the sales of complementary products, thereby generating $31,500 in incremental contribution margin from those products. What is the financial advantage (disadvantage) of adding the new product line?
Transcribed Image Text:Assume a company is considering adding a new product line with the following estimated cost and revenue data: Annual sales 6,000 Selling price per unit $ 180 Variable manufacturing costs per unit $ 140 Variable selling costs per unit $ 15 Incremental fixed manufacturing costs $ 65,000 Incremental fixed selling costs $ 40,000 Allocated common fixed administrative costs $ 45,000 units per year per year per year If the new product line is added, the company expects that it will increase the sales of complementary products, thereby generating $31,500 in incremental contribution margin from those products. What is the financial advantage (disadvantage) of adding the new product line?
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