Final answer:
After calculating the total profit for each product over their respective product lives, Product C is found to have the highest overall profitability, making it the recommended option for introduction.
Step-by-step explanation:
To determine which new product a company should introduce between Product A, Product B, and Product C, we will analyze the anticipated profitability of each over their product life using the given data. Profitability is calculated by determining the total profit over the product's life, which is the difference between total revenue and total costs (including both fixed and variable).
Product A Analysis
Profit: (Annual sales × Selling price - Annual sales × Unit cost - Fixed cost) × Product life = (600 × 760 - 600 × 680 - 200,000) × 3 = $108,000 × 3 = $324,000 total profit
Product B Analysis
Profit: (900 × 1,000 - 900 × 900 - 350,000) × 5 = $50,000 × 5 = $250,000 total profit
Product C Analysis
Profit: (1,200 × 1,290 - 1,200 × 1,200 - 500,000) × 8 = $108,000 × 8 = $864,000 total profit
Based on this analysis, Product C offers the highest total profit over its life and would be the recommended product to introduce. Note, this analysis assumes all else equal and doesn't account for other factors like market demand or opportunity costs which could change the recommended option.