Reference no: EM132543031

Question - Quph Company is considering adding a new type of product, Product U, to its product lines. Below are revenue and variable-cost estimates prepared to help analyze this possible product introduction:

Annual Sales 12,500 units

Selling price per unit $50

Unit variable costs:

Production $20

Selling $8

If Product U is introduced, the product line will include $110,000 in annual fixed cost, composed of $27,000 in newly incurred fixed costs in production; $33,000 in newly incurred fixed costs in sales; and $50,000 in allocated corporate-level costs (reducing allocation to other product lines by $50,000).

Also, if Product U is introduced, it will likely boost sales of Quph Company's current products, increasing the total contribution margin from current products by $26,000.

What is the change in the company's net operating income if the new product is introduced?