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JJ Enterprises currently manufactures two products, A and B. It is considering adding a new product, Product C. The following table shows current information for products A and B, as well as projected data for Product C.
*NOTE: If Product C is produced, one-fourth of the company's common costs, which are fixed costs, will be allocated to Product C, with one-half and one-fourth allocated to products A and B, respectively.
-The incremental income in the decision whether or not to manufacture Product C is:
A)$200,000
B)$135,000
C)$ 70,000
D)$ 62,500

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Use the following to answer questions 
JJ Enterprises currently manufactures two products, A and B. It is considering adding a new product, Product C. The following table shows current information for products A and B, as well as projected data for Product C.
  *NOTE: If Product C is produced, one-fourth of the company's common costs, which are fixed costs, will be allocated to Product C, with one-half and one-fourth allocated to products A and B, respectively.
-The incremental income in the decision whether or not to manufacture Product C is:
A)$200,000 
B)$135,000 
C)$ 70,000 
D)$ 62,500

Quizplus · Accepted Answer

The incremental income is calculated by considering the additional revenue and costs associated with manufacturing Product C. If the revenue from Product C exceeds the additional costs by $70,000, then that is the incremental income.

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