• The Dewey-Cheatum and Howe Company is considering adding a new product to its current product line portfolio. The expected costs and revenue data for the new product is as follows:
  • Annual Sales- 3000 Units
  • Selling Price per Unit $309
    • Variable Cost per Unit:
    • Production $130
    • Selling $ 50
    • Avoidable Fixed Costs per year:
    • Production $51,000
    • Selling $75,000
    • Unavoidable Fixed Costs per year: $54,000

If the new product is added, the sales of the existing products will decline. The Contribution Margin of the existing products is expected to drop $78,000 per year.

Task: Calculate the change to Net Operating Income if, the product is added