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Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows: Annual sales 5,000 units
Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows:
Annual sales | 5,000 | units |
---|---|---|
Unit selling price | $ 60 | |
Unit variable costs: | ||
Production | $ 33 | |
Selling | $ 6 | |
Incremental fixed costs per year: | ||
Production | $ 34,500 | |
Selling | $ 45,000 |
If the company adds the new product, it expects the contribution margin of other product lines to drop by $15,300 per year. What is the financial advantage (disadvantage) of adding the new product?
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