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blsea [12.9K]
3 years ago
8

Beach Surf Boards is making a decision on whether to add long boards as a new product line to complement its short boards. A rec

ent analysis determined that the average long board can be sold for $300.00 with unit variable costs of $225. Fixed costs are currently $51,000 per month but would be increased to $69,000 if long boards are added. How much is the incremental profit or (loss) if long boards are added and its sales volume is expected to be 250 units?
Business
1 answer:
Verizon [17]3 years ago
4 0

Answer:

profit increase by 750 dollars

Explanation:

We must base our analisys considering only the loan board associated cost:

<em><u>contribution per long board:</u></em>

300 sales price - 225 variable cost = $75

total contribution for 250 units:

250x$75 = 18,750

<em><u>increase in fixed cost:</u></em>

69,000 - 51,000 = 18,000

incremental operating profit:

18,750 contribution - 18,000 fixed cost = 750

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