Backus, Inc., makes and sells many consumer products. The firm’saverage contribution margin ratio is 25%. Management is consideringadding a new product that will require an additional $11,000 permonth of fixed expenses and will have variable expenses of $5.5 perunit.
Required:
a. Calculate the selling price that will berequired for the new product if it is to have a contribution marginratio equal to 25%. (Round your answer to 2 decimalplaces.)
b. Calculate the number of units of the newproduct that would have to be sold if the new product is toincrease the firm's monthly operating income by $10,000.(Do not round intermediate calculations.)
