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The western 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:

Expected annual sales 3,000 units

Selling price per unit $309

Variable costs per unit

Production $130

Selling $50

Additional fixed costs for the new product line, per year

production $51,000

Selling $75,000

Current fixed corporate costs that would be allocated to the new product line, per year $54,000

If the new product is added to the existing product line, then sales of existing products are expected to decline. As a consequence, the contribution margin of the other existing product lines is expected to drop by $78,000 per year. No other changes are expected.

a) What would be the net increase or decrease in net operating income for the company if they added the new product?

b) What is the lowest selling price per unit that could be charged for the new product and still make it possible, economically, to add the new product?