Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: 2,500 units $ 304 Annual sales Selling price per unit Variable costs per unit: Production Selling Avoidable fixed costs per year: Production $ 125 $49 $ 50,000 $ 75,000 $ 55,000 Selling Allocated common fixed corporate costs per year 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. If the new product is added next year, the financial advantage (disadvantage) resulting from this decision would be:

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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:
Annual sales
Selling price per unit.
Variable costs per unit:
Production
Selling
Avoidable fixed costs per year:
Production
Selling
Multiple Choice
$325,000
Allocated common fixed corporate costs per year
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.
If the new product is added next year, the financial advantage (disadvantage) resulting from this decision would be:
O $200,000
$145,000
2,500 units
$304
$135,000
$125
$49
$
50,000
$
75,000
$
55,000
Transcribed Image Text: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 Selling price per unit. Variable costs per unit: Production Selling Avoidable fixed costs per year: Production Selling Multiple Choice $325,000 Allocated common fixed corporate costs per year 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. If the new product is added next year, the financial advantage (disadvantage) resulting from this decision would be: O $200,000 $145,000 2,500 units $304 $135,000 $125 $49 $ 50,000 $ 75,000 $ 55,000
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