Reference no: EM132617330

Adding a Product Line. The Clint Fan Company is considering the addition of a new model fan, the F-27, to its current product lines. The expected cost and revenue data for the F-27 fan are as follows:

Annual sales............................................... 4,000 units

Unit selling price ........................................ P58

Unit variable costs: Production............ P34

Selling................................................................ P4

Avoidable fixed costs per year:

Production................................................... P20,000

Selling............................................................ P30,000

If the F-27 model is added as a new product line, it is expected that the contribution margin of other product lines at Clint will drop by P7,000 per year.

Problem 1: If the F-27 product line is added next year, the change in operating income should be:

Problem 2: What is the lowest unit selling price that could be charged for the F-27 model and still make it economically desirable for Flint to add the new product line?