FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Assume a company is considering adding a new product line with the following estimated cost and revenue data:
Annual sales
6,000
Selling price per unit
$ 180
Variable manufacturing costs per unit
$ 140
Variable selling costs per unit
$ 15
Incremental fixed manufacturing costs
$ 65,000
Incremental fixed selling costs
$ 40,000
Allocated common fixed administrative costs $ 45,000
units
per year
per year
per year
If the new product line is added, the company expects that it will increase the sales of complementary products, thereby
generating $31,500 in incremental contribution margin from those products. What is the financial advantage
(disadvantage) of adding the new product line?
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Transcribed Image Text:Assume a company is considering adding a new product line with the following estimated cost and revenue data: Annual sales 6,000 Selling price per unit $ 180 Variable manufacturing costs per unit $ 140 Variable selling costs per unit $ 15 Incremental fixed manufacturing costs $ 65,000 Incremental fixed selling costs $ 40,000 Allocated common fixed administrative costs $ 45,000 units per year per year per year If the new product line is added, the company expects that it will increase the sales of complementary products, thereby generating $31,500 in incremental contribution margin from those products. What is the financial advantage (disadvantage) of adding the new product line?
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