9100 19200 For purposes of simplicity the firm averages tota

9,100 19,200 For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D produced and sold. a new product (E) as a replacement for product D. Market studies show that Tharp Company could sell 11,400 units of E next in demand for product C and discontinuation of company does not introduce the new product, it expects next year\'s results to be the same as last years. No 25

Solution

Tharp Company

Statement of Profit

Products C(9100 Units) and D (19200 Units)

Particulars

Amount

Sales Revenue

(9100*93)+(19200*75)

$ 2,286,300.00

Less: Variable Cost

(9100*50)+(19200*39)

$ 1,203,800.00

Contribution

$ 1,082,500.00

Fixed Cost

(9100*24)+(19200*24)

$      679,200.00

Net Income

$      403,300.00

Tharp Company

Statement of Profit

Products C(10192 Units) and E (11400 Units)

Particulars

Amount

Sales Revenue

(10192*93)+(11400*113)

$ 2,236,056.00

Less: Variable Cost

(10192*50)+(11400*44)

$ 1,011,200.00

Contribution

$ 1,224,856.00

Fixed Cost

$      679,200.00

Net Income

$      545,656.00

Note 1) Fixed Cost will not change with the change in sale volume of Product C and product change from D to E.

Note 2) Sale Units of C is calculated as follows (9100+12%) =10192 Units.

Note 3) It is Assumed that Fixed Cost for Product E will be same as Product D.

Answer

Net Profit with Product C and D

$      403,300.00

Net Profit with Product C and E

$      545,656.00

Product C and E gives higher profit .It is advisable to Produce E next Year.

Tharp Company
Statement of Profit
Products C(9100 Units) and D (19200 Units)
Particulars		Amount
Sales Revenue	(9100*93)+(19200*75)	$ 2,286,300.00
Less: Variable Cost	(9100*50)+(19200*39)	$ 1,203,800.00
Contribution		$ 1,082,500.00
Fixed Cost	(9100*24)+(19200*24)	$      679,200.00
Net Income		$      403,300.00