q35 chap 7

Coronado Company operates a simall factory in which it manufactures two products: A and B. Production and sales results for this year were as follows: For purposes of simplicity the firm averages total fixed costs over the total number of units of A and B produced and sold. The research department has developed a new product (C) as a replacement for product B. Market studies show that Coronado Company could sell 11,900 units of C next year at a price of $125; the variable costs per unit of C are $50. The introduction of product C will lead to a 10x increase in demand for product A and discontinuation of product B. If the company does not introduce the new product, it expects next year's results to be the same as this year's Determine whether Coronado Company should introduce product Creat yean Why or why not? Companv profit with Producte A and A. Femnarvu nrofit wilth Dradiume A and D. Company profit with Products A and C