ABC Ltd. is a manufacturing company that produces a single product. The company currently produces and sells 10,000 units per year at a selling price of $60 per unit. The company has fixed costs of $150,000 per year and variable costs of $30 per unit. The company is considering introducing a new product that will require an initial investment of $200,000 and will have fixed costs of $100,000 per year and variable costs of $40 per unit. The selling price for the new product will be $80 per unit. The company estimates that the new product will sell 7,000 units per year.

a) Determine the contribution margin per unit for each product.
b) Determine the breakeven point in units for each product.
c) Determine the total revenue required to earn a profit of $200,000 after the introduction of the new product.
d) Determine the company’s net income before and after introducing the new product.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a Contribution margin per unit for the current product Selling price per unit 60 Variable ... View the full answer