Snacks Company is considering adding a new product line called Party Munchies. The company currently has excess productive capacity that could be used to produce Party Munchies. Each Party Munchies would sell for $$12$ and the variable costs per unit would be $$5.$ Expected demand for Party Munchies per year is $24,000$ units. Of the total fixed costs, Snacks plans to allocate $$45,000$ to the Party Munchies product line.

Read the requirements.

Requirement a$.$ Should Party Munchies be added? Support your position with calculations.

Requirements

a$.$ Should Party Munchies be added? Support your position with calculations.

b$.$ Which of the following statements is true with respect to the decision concerning Party Munchies?

The $$45,000$ is relevant since the fixed costs must still be incurred.

Since there is excess productive capacity, the fixed costs are irrelevant.

The opportunity cost of adding the product is $$45,000.$

Other relevant factors include demand for other, product lines that could be increased, expertise with the new line, and advertising and other selling costs.