George Corp. has annual revenues of $280,000, an average contribution margin rat

Question

George Corp. has annual revenues of $280,000, an average contribution margin ratio of 34%, and fixed expenses of $102,200.

Management is considering adding a new product to the company's product line. The new item will have $8 of variable costs per unit. Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

If the new product adds an additional $31,900 to George's fixed expenses, how many units of the new product must be sold at the price calculated in requirement a to break even on the new product? (Round your intermediate calculations to 2 decimal places. Round your answer to the nearest whole number.)

If 21,100 units of the new product could be sold at a price of $14.3 per unit, and the company's other business did not change, calculate Meyers's total operating income and average contribution margin ratio. (Round your intermediate calculations to 2 decimal places. Round your answers to 2 decimal places. Omit the "$" and "%" signs in your response.)

Management is considering adding a new product to the company's product line. The new item will have $8 of variable costs per unit. Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Selling price= variable cost/variable cost% = 8/.66 = 12.121

breakeven unit = fixed cost/contribution per unit = $31,900/4.121 = 7741

operating income for new product = 21100*14.3 - 21100*8 - 31900 = 101030

total operating income = 101030 - 7000(loss from exsisting business) = 7630

average contribution ratio = total contribution/ total sales

= ( 21100*6.3+280000*.34)/(21100*14.3 +280000)= 39.215%

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