Krultz Corp. has annual revenues of $760,000, an average contribution margin ratio of 30 percent, and fixed expenses of $75,000.
(a.) Management is considering adding a new product to the company's product line. The new item will have $21 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.
(b.) If the new product adds an additional $36,000 to Krultz's fixed expenses, how many units of the new product must be sold to break even on the new product?
(c.) If 12,000 units of the new product could be sold at a price of $32 per unit, and the company's other business did not change, calculate Krultz's total operating income and average contribution margin ratio.