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?
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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