Question

D&R Corp. has annual revenues of $276,000, an average contribution margin ratio of 33%, and fixed expenses of $117,500.  

Required:

a. Management is considering adding a new product to the company's product line. The new item will have $8.3 of variable costs per unit. Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio. (Round your answer to 2 decimal places.)

b. If the new product adds an additional $32,100 to D&R's fixed expenses, how many units of the new product must be sold at the price calculated in part a to break-even on the new product? (Do not round intermediate calculations.)

c. If 20,100 units of the new product could be sold at a price of $13.6 per unit, and the company's other business did not change, calculate D&R's total operating income and average contribution margin ratio. (Round your intermediate calculations to 2 decimal places. Round "Average contribution margin ratio" to 2 decimal places.)

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.