Decision-Making Using Incremental Analysis

Data: UVW Manufacturing is considering adding a new product line. The following information is available for the new product:

• Expected sales revenue: $100,000
• Variable costs: $60,000
• Fixed costs: $20,000

Requirements:

1. Calculate the contribution margin and contribution margin ratio for the new product line.
2. Determine the incremental net income from adding the new product line.
3. Discuss the concept of incremental analysis in decision-making for UVW Manufacturing.
4. Analyze the qualitative factors that UVW Manufacturing should consider in its decision.
5. Evaluate the risk associated with adding the new product line at UVW Manufacturing.