Pharoah Company operates a small factory in which it manufactures two products: A and B. Production...

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Pharoah Company operates a small factory in which it manufactures two products: A and B. Production and sales results for this year were as follows: A B Units sold 9,200 18,300 Selling price per unit $94 $79 Variable costs per unit 55 49 Fixed costs per unit 21 21 For purposes of simplicity, the firm averages total fixed costs over the total number of units of A and B produced and sold. The research department has developed a new product (C) as a replacement for product B. Market studies show that Pharoah Company could sell 10,400 units of C next year at a price of $121; the variable costs per unit of Care $48. The introduction of product Cwill lead to a 10% increase in demand for product A and discontinuation of product B. If the company does not introduce the new product, it expects next year's results to be the same as this year's. Determine whether Pharoah Company should introduce product C next year. Why or why not? Company profit with Products A and B: Company profit with Products A and C: $ $ A $ $ B S S Total Total C Pharoah Company introduce product C next year as the contribution margin > Pharoah Company operates a small factory in which it manufactures two products: A and B. Production and sales results for this year were as follows: A B Units sold 9,200 18,300 Selling price per unit $94 $79 Variable costs per unit 55 49 Fixed costs per unit 21 21 For purposes of simplicity, the firm averages total fixed costs over the total number of units of A and B produced and sold. The research department has developed a new product (C) as a replacement for product B. Market studies show that Pharoah Company could sell 10,400 units of C next year at a price of $121; the variable costs per unit of Care $48. The introduction of product Cwill lead to a 10% increase in demand for product A and discontinuation of product B. If the company does not introduce the new product, it expects next year's results to be the same as this year's. Determine whether Pharoah Company should introduce product C next year. Why or why not? Company profit with Products A and B: Company profit with Products A and C: $ $ A $ $ B S S Total Total C Pharoah Company introduce product C next year as the contribution margin >

Answer rating: 100% (QA)

To determine whether Pharoah Company should introduce product C next year we need to compare the profits with the current products A and B and the pot... View the full answer