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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 units Selling price per
Assume a company is considering adding a new product line with the following estimated cost and revenue data:
Annual sales | 6,000 | units | |
Selling price per unit | $ | 180 | |
Variable manufacturing costs per unit | $ | 140 | |
Variable selling costs per unit | $ | 15 | |
Incremental fixed manufacturing costs | $ | 65,000 | per year |
Incremental fixed selling costs | $ | 40,000 | per year |
Allocated common fixed administrative costs | $ | 45,000 | 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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