SOWSEY Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows: Annual Sales 2,500 units   Selling Price per unit P304 Variable Costs per unit:     Production P125   Selling P49 Avoidable fixed costs per year:     Production P50,000   Selling P75,000   Allocated common corporate costs per year P55,000       If the new product is added, the combined contribution margin of the other existing products lines is expected to drop P65,000 per year. Total common corporate costs would be unaffected by the decision of whether to add the new product. What is the lowest selling price per unit that could be charged for the new product line and still make an additional P2 income per unit?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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SOWSEY Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows:

Annual Sales

2,500 units

  Selling Price per unit

P304

Variable Costs per unit:

 

  Production

P125

  Selling

P49

Avoidable fixed costs per year:

 

  Production

P50,000

  Selling

P75,000

  Allocated common corporate costs per year

P55,000

 

 

 

If the new product is added, the combined contribution margin of the other existing products lines is expected to drop P65,000 per year. Total common corporate costs would be unaffected by the decision of whether to add the new product. What is the lowest selling price per unit that could be charged for the new product line and still make an additional P2 income per unit?

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