Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: Annual sales 2,500unitsSelling price per unit$304 Variable costs per unit: Production$125 Selling$49 Avoidable fixed costs per year: Production$50,000 Selling$75,000 Allocated common fixed corporate costs per year$55,000 If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product.If the new product is added next year, the financial advantage (disadvantage) resulting from this decision would be:
A. $145,000
B. $325,000
C. $200,000
D. $135,000
Answer: D
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