Reference no: EM132617507
The Clint Fan Company is considering the addition of a new model fan, the F-27, to its current product lines. The expected cost and revenue data for the F-27 fan are as follows:
Annual sales............................................... 4,000 units
Unit selling price ........................................ P58 Unit
variable costs: Production............................................... P34
Selling...................................................... P4
Avoidable fixed costs per year:
Production............................................... P20,000
Selling...................................................... P30,000
If the F-27 model is added as a new product line, it is expected that the contribution margin of other product lines at Clint will drop by P7,000 per year.
Problem 1: If the F-27 product line is added next year, the change in operating income should be?
Problem 2: What is the lowest unit selling price that could be charged for the F-27 model and still make it economically desirable for Flint to add the new product line?