The Western Company Is Considering the Addition of a New

question 121

Multiple Choice

The Western 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: $\begin{array}{|r|r|}\hline \text { Annual Sales } & 3,000 \text { Units } \\\hline \text { Selling Price per Unit } & \$ 309 \\\hline \text { Variable Costs (Per Unit) } & \$ 130 \\\hline \text { Production } & \$ 50 \\\hline \text { Selling } & \\\hline \text { Avoidable Fixed Costs per Year: } & \$ 51,000 \\\hline \text { Production } & \$ 75,000 \\\hline \text { Selling } & \\\hline \text { Unavoidable Allocated Fixed Corporate } & \$ 54,000 \\\hline \text { Costs per Year } & \\\hline\end{array}$ 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.




-Which lowest selling price per unit could be charged for the new product that would still make it economically desirable to add the new product?

• A) $222.
• B) $240.
• C) $248.
• D) $291.

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