2C2L THE DOLL HOUSE, A VERY PROFITABLE COMPANY, PLANS TO INTRODUCE A...

256.

CSO: 2C2f

LOS: 2C2l

The Doll House, a very profitable company, plans to introduce a new type of doll to its

product line. The sales price and costs for the new dolls are as follows.

Selling price per doll

$100

Variable cost per doll

$60

Incremental annual fixed costs

$456,000

Income tax rate

30%

If 10,000 new dolls are produced and sold, the effect on Doll House’s profit (loss) would

be

a.

$(176,000).

b.

$(56,000).

c.

$(39,200).

d.

$280,000.