Exercise 6-11 (Algo) Adding a Product Line [LO 6-2] 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 nales. Selling price per unit Variable manufacturing costs per unit Variable selling costs per unit. Incremental fixed costs per years Manufacturing Selling Allocated common costs per years t Manufacturing Selling and administrative $800 units $ 3,630 $1,630 $480 $488,400 $ 68,000 $93,000 $125,000 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 $226,000 per year. Required: 1. What is the annual financial advantage (disadvantage) of adding the new line of kitchen cabinets? 2. 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? Complete this question by entering your answers in the tabs below.

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
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Exercise 6-11 (Algo) Adding a Product Line [LO 6-2]
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 nales.
Selling price per unit
Variable manufacturing costs per unit
Variable selling costs per unit.
Incremental fixed costs per years
Manufacturing
Selling
Allocated common costs per years t
Manufacturing
Selling and administrative
$800 units
$ 3,630
$1,630
$480
$488,400
$ 68,000
$93,000
$125,000
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 $226,000 per year.
Required:
1. What is the annual financial advantage (disadvantage) of adding the new line of kitchen cabinets?
2. 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?
Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Exercise 6-11 (Algo) Adding a Product Line [LO 6-2] 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 nales. Selling price per unit Variable manufacturing costs per unit Variable selling costs per unit. Incremental fixed costs per years Manufacturing Selling Allocated common costs per years t Manufacturing Selling and administrative $800 units $ 3,630 $1,630 $480 $488,400 $ 68,000 $93,000 $125,000 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 $226,000 per year. Required: 1. What is the annual financial advantage (disadvantage) of adding the new line of kitchen cabinets? 2. 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? Complete this question by entering your answers in the tabs below.
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