Crane Company operates a small factory in which it manufactures two products: A and B. Production and sales result for last year were as follow: Units sold Selling price per unit Unit variable cost Unit fixed cost A 8,320 65 35 15 B 16,640 52 30 15 For purposes of simplicity, the firm allocates total fixed costs over the total number of units of A and B produced and sold. The research department has developed a new product (C) as a replacement for product B. Market studies show that Crane Compar could sell 11,640 units of C next year at a unit selling price of $80. The unit variable cost of C is $39. The introduction of product Cw lead to a 10% increase in demand for product A and discontinuation of product B. If the company does not introduce the new produ it expects next year's result to be the same as last year's.

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