The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its...

 

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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 provided below: Annual sales Selling price per unit 5,000 units $180 $135 Avoidable fixed costs per year $100,000 $45,000 Variable costs per unit 4. Allocated fixed costs per year If the new cabinets are added, it is expected that the contribution margin of the other product lines at the cabinet shop will drop by $20,000 per year. If the new cabinet line is added, the increase in net income resulting from this decision would be: 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 provided below: Annual sales Selling price per unit 5,000 units $180 $135 Avoidable fixed costs per year $100,000 $45,000 Variable costs per unit 4. Allocated fixed costs per year If the new cabinets are added, it is expected that the contribution margin of the other product lines at the cabinet shop will drop by $20,000 per year. If the new cabinet line is added, the increase in net income resulting from this decision would be:

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