Rolston Music Company is considering the sale of a new sound board used in recor

Question

Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $27,100, and the company expects to sell 1,560 per year. The company currently sells 2,060 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,880 units per year. The old board retails for $23,000. Variable costs are 56 percent of sales, depreciation on the equipment to produce the new board will be $1,510,000 per year, and fixed costs are $1,410,000 per year.

Explanation / Answer

1880 units 1560 units

old board new sound Board

Sales 43,240,000 42,276,000

less: Variable cost 56% (24,214,400) (23,674,560)

less: depreciation on new (1,510,000)

19,025,600 17,091,440

total profit 36,117,040

less: fixed cost (1,410,000)

34,707,040.

note: in question not mention anything what need to compare and what need to find?.

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