Krultz Corp

question 42

Essay

Krultz Corp.has annual revenues of $760,000, an average contribution margin ratio of 30 percent, and fixed expenses of $75,000.
(a.)Management is considering adding a new product to the company's product line.The new item will have $21 of variable costs per unit.Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio.
(b.)If the new product adds an additional $36,000 to Krultz's fixed expenses, how many units of the new product must be sold to break even on the new product?
(c.)If 12,000 units of the new product could be sold at a price of $32 per unit, and the company's other business did not change, calculate Krultz's total operating income and average contribution margin ratio.

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Definitions:

Immediate Market

A marketplace or environment where transactions occur directly and without delay, allowing for the quick exchange of goods or services.

Industry

A sector of the economy that includes businesses and organizations that produce similar goods or services.

Economic Costs

The sum of explicit and implicit costs which represent the total opportunity costs of resource utilization in the production of goods or services.

Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen.