Merced Corporation Is Considering Adding a New Product Line

Merced Corporation is considering adding a new product line. Market research indicates that sales revenue for the new line would be $80,000 for 35,000 units. Variable costs would be $1.70 per unit; direct fixed costs, $0.40 per unit; and indirect fixed costs, $0.50 per unit. If Merced added the new line, its income would:

A) Increase by $20,500
B) Increase by $6,500
C) Decrease by $5,000
D) Decrease by $11,000

Correct Answer:

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