Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 7, Problem 7.17E
Tharp Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows.
| C | D | |
| Units sold | 9,000 | 20,000 |
| Selling price per unit | $95 | $75 |
| Variable cost per unit | 50 | 40 |
| Fixed cost per unit | 24 | 24 |
For purposes of simplicity, the firm
The research department has developed a new product (E) as a replacement for product D. Market studies show that Tharp Company could sell 10,000 units of E next year at a price of $115; the variable cost per unit of E is $45. The introduction of product E will lead to a 10% increase in demand for product C and discontinuation of product D. If the company does not introduce the new product, it expects next year’s results to be the same as last year’s.
Instructions
Should Tharp Company introduce product E next year? Explain why or why not. Show calculations to support your decision.
(CMA-Canada adapted)
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Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
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