Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 15

Calculate selling price of new product with a target CM ratio Backus, Inc., makes and sells many consumer products. The firm's average contribution margin ratio is 35%. Management is considering adding a new product that will require an additional $15,000 per month of fixed expenses and will have variable expenses of $7.80 per unit.
Required:
a. Calculate the selling price that will be required for the new product if it is to have a contribution margin ratio equal to 35%.
b. Calculate the number of units of the new product that would have to be sold if the new product is to increase the firm's monthly operating income by $6,000.