Pedal heads has a new opportunity. Instead of just selling bicycles, they could sell electric motocross bicycles. Estimates suggest that the selling price of the new product would be $9,200 each and that sales could reach 120 units. In order to do this, Pedal heads would have to spend an additional $350,000 on one time factory improvements. The cost of each electric motocross bicycle will be $6,500. The expansion into e-bikes is expected to reduce sales of bicycles by 305 units but balanced by an increase in selling price of $800 per unit. What is the impact to operating profit and should Pedal heads expand to 2 products? 

Question 22Answer 

a. $41,000 increase, yes 

b. $309,000 increase, yes 

c. Ignore the nerdy accounting analysis, just go for it dude!! 

d. $41,000 decrease, no e. $630,000 increase, no