Question

Use below information for Questions 9 to 10:

Company X operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows:

Item	C	D
Units sold	9,000	20,000
Selling price per unit	97	75
Variable cost per unit	50	40
Fixed cost per unit	24	24

For purposes of simplicity, the firm averages total fixed costs over the total number of units produced. The research department has developed a new product (E) as a replacement for product D. Market studies show that the firm could sell 10,000 units of E next year at a price of TL117. The variable cost per unit of E is TL46. The introduction of E will lead to a 13% increase in demand for product C and discontinuation of product D. If the company does not introduce the new product, it expects next year’s results to be the same as last year’s.

9.Calculate net income for the next year if the company does not introduce product E.

10.Calculate net income for the next year if the company introduces product E.

Answer 1

	Comparison of Net profit
9)		C	D	Total
		Per unit	Value	Per unit	Value
	Unit Sold		9000		20000	29000
	Sales Value	97	873000	75	1500000	2373000
	Variable cost	50	450000	40	800000	1250000
	Fixed cost	24	216000	24	480000	696000
	Total Cost	74	666000	64	1280000	1946000
	Net profit	23	207000	11	220000	427000
10)		C	E	Total
		Per unit	Value	Per unit	Value
	Unit Sold		10170		10000	20170
	Sales Value	97	986490	117	1170000	2156490
	Variable cost	50	508500	46	460000	968500
	Fixed cost(696000/(10170+10000)	34.51	350933	34.51	345067	696000
	Total Cost	84.51	859433	80.51	805067	1664500
	Net profit	12.49	127057	36.49	364933	491990