Carla Vista Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last
year were as follows.
D
Units sold
8,800
20,000
Unit selling price
$97
$75
Unit variable costs
47
42
Unit fixed costs
23
23
For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D produced and sold.
The research department has developed a new product (E) as a replacement for product D. Market studies show that Carla Vista
Company could sell 11.900 units of E next year at a price of $113; unit variable costs of E are $45. The introduction of product E will
lead to a 11% 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
Compute company profit with products C & D and with products C & E.
Net profit with products C & D
$
Net profit with products C & E
$
