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The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. Expected cost and revenue data for
The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. Expected cost and revenue data for the new cabinets are as follows: Annual unit Sales 4,870 Selling Price per unit $176 Variable costs per unit: Production $102 Selling $11 Avoidable fixed costs per year: Production Selling $40,000 $60,000 Allocated common fixed costs per year $45,000 If the new cabinets are added, it is expected that the contribution margin of other product lines at the cabinet shop will drop by $20,000 per year. If the new cabinet product line is added next year, the increase in net operating income resulting from this decision would be: a. $186,810 b. $141,810 c. $300,380 d. $255,380 e. $206.810
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