SPKY Ltd. makes and sells two (2) products, Her and Him. The financial results for the year ended December 31, 2020 were as follows: Her Him Total Unit Sales 350,000 $700,000 131,250 $603,750 481,250 $1,303,750 Revenues Cost of Sales: Variable $245,000 $157,500 $402,500 $319,060 $202,300 $116,760 $252,700 $329,490 $582,190 $140,000 $70,700 $84,000 $124,740 $224,000 $162,750 Fixed Gross Margin Selling and Administrative expenses: Variable Fixed Product Line Profit Organizational-wide Costs: Fixed Costs Equipment Lease expense Equipment rental revenue Income Before Taxes $42,000 $120,750 $162,750 $226,940 $70,000 $84,000 ($50,190) To address the poor financial performance in 2020, the company is considering adding a new product, ITT. a. The company expects to sell 7,000 units of ITT, at a price of $92.50 per unit. The variable manufacturing cost per unit will be $39.00, and variable selling and general administrative expense per unit will be $37.80. b. The introduction of ITT is expected to add $60,600 to the fixed manufacturing cost of It. c. Of the present fixed organizational-wide costs of $226,940, $86,940 will be allocated to the fixed manufacturing cost of ITT and $70,000 will be allocated towards it marketing. d. Currently the company is earning rental revenue of $84,000 by renting equipment that it did not require for either His or her. The company is leasing the equipment for $70,000 per year. The equipment will now be used for making ITT. e. The product manager of Him has indicated that sales of Him will decline by one-third from their present level with the addition of ITT, as these products compete in the same market. Due to this decline, the company will no longer require leased space that is being used for the purpose of selling and administrative activities of Him, and the company will allow the lease to expire. The annual payments for leasing the space have been around $70,000. Required: Determine whether the company should introduce ITT. Show all calculations