Waterway Company operates a small factory in which it manufactures two products: A and B. Production and sales results for this year were as follows:

		A		B
Units sold		8,500		18,700
Selling price per unit		$98		$77
Variable costs per unit		53		51
Fixed costs per unit		21		21

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 Waterway Company could sell 11,400 units of C next year at a price of $120; the variable costs per unit of C are $49. 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 years results to be the same as this years. Determine whether Waterway Company should introduce product C next year. Why or why not?

Company profit with Products A and B:
		A		B		Total
select an item Fixed costsVariable costsNet income (loss)Units soldContribution marginSales revenue		enter a number of units		enter a number of units
select an item Contribution marginFixed costsSales revenueUnits soldVariable costsNet income (loss)		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select between addition and deduction AddLess: select an item Units soldSales revenueFixed costsContribution marginVariable costsNet income (loss)		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a summarizing line for the first part Contribution marginUnits soldVariable costsSales revenueNet income (loss)Fixed costs		$enter a total amount for the first part		$enter a total amount for the first part		enter a total amount for the first part
select between addition and deduction AddLess: select an item Units soldNet income (loss)Fixed costsSales revenueVariable costsContribution margin						enter a dollar amount
select a closing name for this statement Contribution marginVariable costsUnits soldNet income (loss)Sales revenueFixed costs						$enter a total net income or loss amount

Company profit with Products A and C:
		A		C		Total
select an item Units soldNet income (loss)Variable costsFixed costsSales revenueContribution margin		enter a number of units		enter a number of units
select an item Sales revenueFixed costsUnits soldNet income (loss)Contribution marginVariable costs		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select between addition and deduction AddLess: select an item Fixed costsVariable costsNet income (loss)Units soldContribution marginSales revenue		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a summarizing line for the first part Net income (loss)Variable costsFixed costsContribution marginUnits soldSales revenue		$enter a total amount for the first part		$enter a total amount for the first part		enter a total amount for the first part
select between addition and deduction LessAdd: select an item Sales revenueVariable costsNet income (loss)Fixed costsContribution marginUnits sold						enter a dollar amount
select a closing name for this statement Sales revenueContribution marginUnits soldNet income (loss)Fixed costsVariable costs						$enter a total net income or loss amount

Waterway Company select an option shouldshould not introduce product C next year as the contribution margin select an option increaseddecreased