Backus, Inc., makes and sells many consumer products. The firm’s average contribution margin ratio is 25%. Management is considering adding a new product that will require an additional $13,000 per month of fixed expenses and will have variable expenses of $7 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 25%. (Round your answer to 2 decimal places.)
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 $7,500. (Do not round intermediate calculations.)