Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cabin Creek Company is considering adding a new line of kitchen cabinets. The company s accountant provided the following estimated data for these cabinets: Annual

Cabin Creek Company is considering adding a new line of kitchen cabinets. The companys accountant provided the following estimated data for these cabinets:
Annual sales 800 units
Selling price per unit $ 3,590
Variable manufacturing costs per unit $ 1,590
Variable selling costs per unit $ 440
Incremental fixed costs per year:
Manufacturing $ 484,400
Selling $ 64,000
Allocated common costs per year:
Manufacturing $ 89,000
Selling and administrative $ 121,000
If the kitchen cabinets are added as a new product line, the company expects that the contribution margin earned from selling its other products will decrease by $218,000 per year.
Required:
What is the annual financial advantage (disadvantage) of adding the new line of kitchen cabinets?
What is the lowest selling price per unit that could be charged for the cabinets and still make it economically desirable for the company to add the new product line?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Core Concepts Of Accounting

Authors: Robert N. Anthony, Leslie Pearlman Breitner

8th Edition

0130406716, 9780130406712

More Books

Students also viewed these Accounting questions

Question

d. Is the program accredited?

Answered: 1 week ago