The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. Expected cost and revenue data for the new cabinets are as follows: Annual sales 5,000 units Selling price per unit £180 Variable costs per unit: Production £120 Selling £15 Avoidable fixed costs per year: Production £40,000 Selling £60,000 Allocated common fixed costs per year £45,000 If the new cabinets are added, it is expected that the contribution margin of other product lines at the cabinet shop will drop by £20,000 per year. What is the lowest selling price per unit that could be charged for the new cabinets and still make it economically desirable to add the new product line Multiple Choice A) £171. B) £159. C) £164. D) £151.
The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. Expected cost and revenue data for the new cabinets are as follows: Annual sales 5,000 units Selling price per unit £180 Variable costs per unit: Production £120 Selling £15 Avoidable fixed costs per year: Production £40,000 Selling £60,000 Allocated common fixed costs per year £45,000 If the new cabinets are added, it is expected that the contribution margin of other product lines at the cabinet shop will drop by £20,000 per year. What is the lowest selling price per unit that could be charged for the new cabinets and still make it economically desirable to add the new product line Multiple Choice A) £171. B) £159. C) £164. D) £151.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
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The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. Expected cost and revenue data for the new cabinets are as follows:
| Annual sales | 5,000 units |
| Selling price per unit | £180 |
| Variable costs per unit: | |
| Production | £120 |
| Selling | £15 |
| Avoidable fixed costs per year: | |
| Production | £40,000 |
| Selling | £60,000 |
| Allocated common fixed costs per year | £45,000 |
If the new cabinets are added, it is expected that the contribution margin of other product lines at the cabinet shop will drop by £20,000 per year. What is the lowest selling price per unit that could be charged for the new cabinets and still make it economically desirable to add the new product line
Multiple Choice
A)
£171.B)
£159.C)
£164.D)
£151.Expert Solution
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