Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. Bases on current research, ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product.

What is the product cost for the expansion product under absorption and variable costing?
b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product?
c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product?
d. Assuming the same sales mix of these two products, what are the contribution margins and break-even points by product?

The given financial information is:

ABC Company's current financial information (before/without expansion)
	Dec. 31,20X2	Dec. 31,20X1
Cash	$ 50,000	$ 70,000
Accounts receivable (net)	$ 120,000	$ 180,000
Merchandise inventory	$ 350,000	$ 280,000
Property plant, & equipment	$ 400,000	$ 300,000
Less: Accumulated depreciation	$ (170,000)	$ (100,000)
Total assets	$ 750,000	$ 730,000
Accounts payable	$ 250,000	$ 210,000
Income taxes payable	$ 40,000	$ 10,000
Common stock	$ 240,000	$ 240,000
Retained earnings	$ 220,000	$ 270,000
Total liabilities & stock, equity	$ 750,000	$ 730,000
The firm's accrual-basis income statement revealed the following data:
Sales	$ 1,200,000
Cost of goods sold	$ 800,000
selling and administrative expenses	$ 250,000
Depreciation expense	$ 70,000
Income taxes	$ 30,000
Dividends declared and paid during 20X2	$ 100,000
ABC purchased $100,000 of equipment for cash on August 14, 20X2