The ABC Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows:

Annual Sales	4,000 Units
Selling Price per Unit	$290
Variable Costs (Per Unit)
Production	$130
Selling	$50
Avoidable Fixed Costs per Year:
Production	$51,000
Selling	$75,000
Unavoidable Allocated Fixed Corporate
Costs per Year	$54,000

If the new product is added to the existing product line, then sales of existing products will decline. Therefore, the contribution margin of the other existing product lines is expected to drop $78,000 per year. If the new product is added next year, what will be the increase in operating income resulting from this decision?

a.

$387,000

b.

$261,000

c.

$236,000

d.

$207,000

Clear my choice