ABC Ltd. manufactures and sells a single product for $120 per unit. The companys budgeted production and
Question:
ABC Ltd. manufactures and sells a single product for $120 per unit. The company’s budgeted production and sales for the year are 30,000 units. The company incurs variable costs of $80 per unit and fixed costs of $480,000 per year. The company’s tax rate is 25%. The company is considering adding a new product line that will require a $150,000 investment and will generate sales revenue of $180,000 per year. The variable cost for the new product line is expected to be 60% of its selling price. The company expects to sell 5,000 units of the new product line per year. Determine whether the company should add the new product line or not, showing all the calculations.
Managerial Accounting
ISBN: 978-1259024900
9th canadian edition
Authors: Ray Garrison, Theresa Libby, Alan Webb