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 2,500unitsSelling 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 $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

Break-even analysis is a technique used widely by the production management. It helps to determine…

Answered: Key Corporation is considering the…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6PA: Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit...

See similar textbooks

Related questions

Concept explainers

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 $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

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions