Question

Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: Annual sales: 2,500 units Selling price per unit: $304 Variable costs per unit: Production: $125 Selling: $49 Avoidable fixed costs per year: Production: $50,000 Selling: $75,000 Allocated common fixed corporate costs per year: $55,000 If the new product is added, the combined contribution margin of the other existing products is expected to drop by $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product. At what selling price would the new product be just breaking even? $232 per unit $282 per unit $250 per unit $246 per unit

          Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows:
Annual sales: 2,500 units
Selling price per unit: $304
Variable costs per unit:
Production: $125
Selling: $49
Avoidable fixed costs per year:
Production: $50,000
Selling: $75,000
Allocated common fixed corporate costs per year: $55,000
If the new product is added, the combined contribution margin of the other existing products is expected to drop by $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product. At what selling price would the new product be just breaking even?
$232 per unit
$282 per unit
$250 per unit
$246 per unit

Added by Joshua S.

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