1. How much is the increase or decrease in the total profit of the company if it decides to add the new Foldable tablet product line? 

2. Based on your differential analysis, should the company add or not the new Foldable tablet product line? 

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The management of Ogie Inc. is considering the entry of its Foldable tablet product line in the market. Because its existing product line, Cellular phone, has similar characteristics to the new product line, management expects the Foldable tablet sales to require a minimum of additional expense. It is also anticipated that Cellular phone sales will increase if both product lines are offered in a package deal. The Foldable tablet product line would be manufactured in a company-owned facility that is now being rented to another firm for P600,000 per year. Depreciation on this facility and all other building expenses are presently P100,000 per year. In addition, the company will need to rent equipment to manufacture the new product line at an additional cost of P150,000 per year. The contribution margin for the Foldable tablet product line would be 40,000 units. Other relevant per unit sales and cost data were: Selling price Variable cost of goods sold Fixed cost of goods sold Variable marketing and administrative expenses Fixed marketing and administrative expenses 100 25 20 10 15 2299 If the new Foldable tablet product line is undertaken, the company expects a 10% increase in Cellular phone sales. Otherwise, Cellular phone sales will remain unchanged. Additional facilities will not be needed to manufacture the additional Cellular phones units. The management of Ogie Inc. is considering the entry of its Foldable tablet product line in the market. Because its existing product line, Cellular phone, has similar characteristics to the new product line, management expects the Foldable tablet sales to require a minimum of additional expense. It is also anticipated that Cellular phone sales will increase if both product lines are offered in a package deal. The Foldable tablet product line would be manufactured in a company-owned facility that is now being rented to another firm for P600,000 per year. Depreciation on this facility and all other building expenses are presently P100,000 per year. In addition, the company will need to rent equipment to manufacture the new product line at an additional cost of P150,000 per year. The contribution margin for the Foldable tablet product line would be 40,000 units. Other relevant per unit sales and cost data were: Selling price Variable cost of goods sold Fixed cost of goods sold Variable marketing and administrative expenses Fixed marketing and administrative expenses 100 25 20 10 15 2299 If the new Foldable tablet product line is undertaken, the company expects a 10% increase in Cellular phone sales. Otherwise, Cellular phone sales will remain unchanged. Additional facilities will not be needed to manufacture the additional Cellular phones units.

Answer rating: 100% (QA)

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