The Western Company Is Considering the Addition of a New

question 80

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: If the new product is added to the existing product line, then sales of existing products will decline. As a consequence, the contribution margin of the other existing product lines is expected to drop $78,000 per year.
-What is the lowest selling price per unit among those listed below that could be charged for the new product and still make it economically desirable to add the new product?

• A)$240
• B)$222
• C)$291
• D)$249

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Definitions:

Manufacturing Costs

Expenses directly connected to the production of goods, including direct materials, direct labor, and manufacturing overhead.

Work In Process

Refers to the costs accumulated for products that are in the process of being manufactured but are not yet complete.

First-In, First-Out

A rephrased definition: An inventory management strategy that assumes the items stocked first are the first to be sold, used to manage costs and inventory levels.

Inventory Costing

This is a method used to value inventory, including methods like FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted average cost.