Pharoah Company operates a small factory in which it manufactures two products: C and D....
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Pharoah Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows.
| C | D | ||||
|---|---|---|---|---|---|
| Units sold | 9,200 | 19,200 | |||
| Unit selling price | $ 94 | $ 76 | |||
| Unit variable costs | 51 | 42 | |||
| Unit fixed costs | 23 | 23 |
For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D produced and sold. The research department has developed a new product (E) as a replacement for product D. Market studies show that Pharoah Company could sell 11,900 units of E next year at a price of $ 116; unit variable costs of E are $ 43. The introduction of product E will lead to a 12% increase in demand for product C and discontinuation of product D. If the company does not introduce the new product, it expects next years results to be the same as last years. Compute company profit with products C & D and with products C & E.
| Net profit with products C & D | $ enter a dollar amount | ||
|---|---|---|---|
| Net profit with products C & E | $ enter a dollar amount |
Should Pharoah Company introduce product E next year? select an option YesNo
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