The ABC Company is considering the addition of a new product to its current product...
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Accounting
The ABC 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: Annual Sales 3,000 Units Selling Price per Unit $309 Variable Costs (Per Unit) Production $130 Selling $50 Avoidable Fixed Costs per Year: Production $51,000 Selling $75,000 Unavoidable Allocated Fixed Corporate Costs per Year $54,000 If the new product is added to the existing product line, then sales of existing products will decline. Therefore, the contribution margin of the other existing product lines is expected to drop $78,000 per year. If the new product is added next year, what will be the increase in operating income resulting from this decision?
a.
$207,000
b.
$261,000
c.
$183,000
d.
$387,000
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