Beach Surf Boards is making a decision on whether to add long boards as a new product line to complement its short boards.A recent 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 incremental profit or (loss) if long boards are added and its sales volume is expected to be 250?
A)$750
B)$18,750
C)($32,250)
D)($50,250)

Question

Quizplus · Accepted Answer

The incremental profit is calculated as follows: Incremental Revenue = 250 units * $300 = $75,000. Incremental Variable Costs = 250 units * $225 = $56,250. Incremental Fixed Costs = $69,000 - $51,000 = $18,000. Incremental Profit = Incremental Revenue - Incremental Variable Costs - Incremental Fixed Costs = $75,000 - $56,250 - $18,000 = $750.

Beach Surf Boards Is Making a Decision on Whether to Add