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Straus Company operates a small factory in which it manufactures two products: A and B. Production and sales results for last year were as follows:
Straus Company operates a small factory in which it manufactures two products: A and B. Production and sales results for last year were as follows: A B Units sold 8,000 20,000 Selling price per unit $95 $78 Variable costs per unit 50 45 Fixed costs per unit 22 22 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 Straus Company could sell 11,000 units of C next year at a price of $120; the variable costs per unit of C are $42. 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 last year's. Compute company profit with products A & B and with products A & C. Net profit products A & B $ Net profit products A & C $ Should Straus Company introduce product C next year
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