Author Question: Sanderson's Woodworking Company is considering the addition of a new line of quilt frames to its ... (Read 14 times)

dusk108 · **on:** Feb 5, 2023

Sanderson's Woodworking Company is considering the addition of a new line of quilt frames to its current product lines. If the new quilt frames are added to Sanderson's production, contribution margin of the other products is expected to drop by $2,000. Sanderson has summarized the projected revenue and cost for the new line of frames.

Annual sales	200 units
Selling price per unit	$ 250
Variable costs per unit
Manufacturing	180
Selling	5
Avoidable fixed costs per year
Production	3,000
Selling	4,000
Allocated common fixed costs per year	1,600

Required:
a. If Sanderson adds the new quilt frame to its line of products, what will be the increase in operating income?
b. What are three issues that Sanderson should consider before adding the new line?

ladan86 · **Reply #1 on:** Feb 5, 2023

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