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Tharp Company Operates A Small Factory in Which It Manufactures

Tharp Company operates a small factory manufacturing products C and D. A new product, E, has been developed to replace D. Introducing E would lead to increased demand for C and discontinuation of D. The company must decide whether to introduce E next year based on potential sales and costs. Calculations are required to support the decision.

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Muhammad Shahid
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152 views1 page

Tharp Company Operates A Small Factory in Which It Manufactures

Tharp Company operates a small factory manufacturing products C and D. A new product, E, has been developed to replace D. Introducing E would lead to increased demand for C and discontinuation of D. The company must decide whether to introduce E next year based on potential sales and costs. Calculations are required to support the decision.

Uploaded by

Muhammad Shahid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Tharp Company operates a small factory in which it

manufactures #6057
Tharp Company operates a small factory in which it manufactures

Tharp Company operates a small factory in which it manufactures two products: C and D.
Production and sales results for last year were as follows.

For purposes of simplicity, the firm averages total fixed costs over the total number of units of C
and D produced and sold.

The research department has developed a new product (E) as a replacement for product D.
Market studies show that Tharp Company could sell 10,000 units of E next year at a price of
$115; the variable cost per unit of E is $45. The introduction of product E will lead to a 10%
increase in demand for product C and discontinuation of product D. If the company does not
introduce the new product, it expects next year's results to be the same as last year's.

Instructions

Should Tharp Company introduce product E next year? Explain why or why not. Show
calculations to support your decision.

Tharp Company operates a small factory in which it manufactures

ANSWER
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