Twyla Company operates a small factory in which it manufactures two products: C

Question

Twyla Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows.

For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D produced and sold.

The research department has developed a new product (E) as a replacement for product D. Market studies show that Twyla Company could sell 11,380 units of E next year at a price of $115; the variable cost per unit of E is $43. The introduction of product E will lead to a 11% increase in demand for product C and discontinuation of product D. If the company does not introduce the new product, it expects next year

C D Units sold 9,000 19,790 Selling price per unit $94 $77 Variable cost per unit 49 40 Fixed cost per unit 20 20

Explanation / Answer

How did you arrive at the Fixed cost?

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