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Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: Annual sales
Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows:
Annual sales | 2,500 | units | |
Selling price per unit | $ | 304 | |
Variable costs per unit: | |||
Production | $ | 125 | |
Selling | $ | 49 | |
Avoidable fixed costs per year: | |||
Production | $ | 50,000 | |
Selling | $ | 75,000 | |
Allocated common fixed corporate costs per year | $ | 55,000 | |
If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product.
At what selling price would the new product be just breaking even?
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