Cabin Creek Company is considering adding of a new line of kitchen cabinets. The company's accountant provided the following estimated data for these cabinets: Annual sales $ 800 units Selling price per unit $ 3,690 Variable manufacturing costs per unit $ 1,690 Variable selling costs per unit $ 540 Incremental fixed costs per year: Manufacturing $ 494,400 Selling $ 74,000 Allocated common costs per year: Manufacturing $ 99,000 Selling and administrative $ 131,000 If the kitchen cabinets are added as a new product line, the company expects that the contribution margin earned from selling its other products will decrease by $238,000 per year. Required: What is the annual financial advantage (disadvantage) of adding the new line of kitchen cabinets?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Please do not give solution in image format thanku 

Cabin Creek Company is considering
adding of a new line of kitchen cabinets.
The company's accountant provided the
following estimated data for these
cabinets: Annual sales $ 800 units
Selling price per unit $ 3,690
Variable manufacturing costs per unit $
1,690
Variable selling costs per unit $ 540
Incremental fixed costs per year:
Manufacturing $ 494,400
Selling $ 74,000
Allocated common costs per year:
Manufacturing $ 99,000
Selling and administrative $ 131,000
If the kitchen cabinets are added as a new
product line, the company expects that the
contribution margin earned from selling its
other products will decrease by $238,000
per year.
Required:
What is the annual financial advantage
(disadvantage) of adding the new line of
kitchen cabinets?
What is the lowest selling price per unit
that could be charged for the cabinets and
still make it economically desirable for the
company to add the new product line?
Transcribed Image Text:Cabin Creek Company is considering adding of a new line of kitchen cabinets. The company's accountant provided the following estimated data for these cabinets: Annual sales $ 800 units Selling price per unit $ 3,690 Variable manufacturing costs per unit $ 1,690 Variable selling costs per unit $ 540 Incremental fixed costs per year: Manufacturing $ 494,400 Selling $ 74,000 Allocated common costs per year: Manufacturing $ 99,000 Selling and administrative $ 131,000 If the kitchen cabinets are added as a new product line, the company expects that the contribution margin earned from selling its other products will decrease by $238,000 per year. Required: What is the annual financial advantage (disadvantage) of adding the new line of kitchen cabinets? What is the lowest selling price per unit that could be charged for the cabinets and still make it economically desirable for the company to add the new product line?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education