Greenville Corporation 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 3,000 unts
Selling price per unit $309
Variable costs per unit:
Avoidable fixed costs per year:
Unavoidable allocated fixed corporate costs per year: $54,000
If the new product is added to the existing product line, then sales of existing products will decline. As a consequence, the contribution margin of the other existing product lines is expected to drop $78,000 per year.
A. If the new product is added next year, the increase in net operating income resulting from this decision would be:
B. What is the lowest selling price per unit that could be charged for the new product and still make it economically desirable to add the new product?
The operating income for Greenville Corporations are examined.