Q35

Shamrock Company operates a small factory in which it manufactures two products: A and B. Production and sales results for this year were as follows: A B Units sold 8.700 18,900 $93 $80 Selling price per unit Variable costs per unit Fixed costs per unit 55 52 23 23 For purposes of simplicity, the form 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 Shamrock Company could sell 11.450 units of C next year at a price of $120; the variable costs per unit of Care $46. The introduction of product C will lead to a 10% 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 Shamrock Company should introduce product C next year. Why or why not? Company profit with Products A and B: A B Total $ $ Company profit with Products A and C: A Total $ Shamrock Company introduce product C next year as the contribution margin