Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: Annual sales 2,500 units Selling price per unit $ 304 Variable costs per unit: Production $ 125 Selling $ 49 Avoidable fixed costs per year: Production $ 50,000 Selling $ 75,000 Allocated common fixed corporate costs per year $ 55,000 If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product. At what selling price would the new product be just breaking even? $232 per unit $282 per unit $250 per unit $246 per unit
Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: Annual sales 2,500 units Selling price per unit $ 304 Variable costs per unit: Production $ 125 Selling $ 49 Avoidable fixed costs per year: Production $ 50,000 Selling $ 75,000 Allocated common fixed corporate costs per year $ 55,000 If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product. At what selling price would the new product be just breaking even? $232 per unit $282 per unit $250 per unit $246 per unit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows:
If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product.
At what selling price would the new product be just breaking even?
| Annual sales | 2,500 | units | |
| Selling price per unit | $ | 304 | |
| Variable costs per unit: | |||
| Production | $ | 125 | |
| Selling | $ | 49 | |
| Avoidable fixed costs per year: | |||
| Production | $ | 50,000 | |
| Selling | $ | 75,000 | |
| Allocated common fixed corporate costs per year | $ | 55,000 |
At what selling price would the new product be just breaking even?
|
$232 per unit
|
||
|
$282 per unit
|
||
|
$250 per unit
|
||
|
$246 per unit
|
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