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Calculate the number of units of the new product

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Reference no: EM133159935

Question - Calculate selling price of new product with a target CM ratio - Backus Inc. makes and sells many consumer products. The firm's average contribution margin ratio is 20%. Management is considering adding a new product that will require an additional $15,000 per month of fixed expenses and will have variable expenses of $8.5 per unit.

Required -

a. Calculate the selling price that will be required for the new product if it is to have a contribution margin ratio equal to 20%.

b. Calculate the number of units of the new product that would have to be sold if the new product is to increase the firm's monthly operating income by $7,700.

Reference no: EM133159935

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