Question: The Beryn Company is considering the addition of a new product to its product line. The firm has plenty of excess manufacturing capacity to produce the new product, and its total fixed costs would be unaffected if the new product were added to its line. Nonetheless, the firm’s accountants decided that a reasonable share of the firm’s present fixed costs should be allocated to the new product. Specifically, they decided that a $300,000 fixed charge will be absorbed by the new product. The variable cost per unit of making and selling the new product is $14, which is composed of the following.

a) What is the profit if Berwyn sells 10,000 units of the new line at $25?

b) Should the firm introduce the new product?