P19.38 LO19.7 Introducing a new product: manufacturer EBP Ltd is a small firm involved in the production and sale of electronic business products. The company is bidad well known for its attention to quality and innovation. During the past 15 months, a new product has been under development that allows users handheld access to email and video images. EBP named the product 'Wireless Wizard' and has been quietly designing two models: Standard and Enhanced. Development costs have amounted to $181500 and $262500, respectively. The total market demand for each model is expected to be 40000 units, and management anticipates being able to obtain the following market shares: Standard, 25 per cent; Enhanced, 20 per cent. Forecast data follow: Projected selling price Enhanced $495.00 Standard $375.00 Production cost per unit: Direct material 42.00 67.50 Direct labour 22.50 30.00 Variable overhead 36.00 48.00 Fixed overhead 54.00 72.00 Marketing and advertising per product line 195000 300000 Sales salaries per product line 85500 85.500 Sales commissions* Calculated on the basis of sales dollars. 10% 10% 93019 Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with EBP paying $34 500 for an in-depth market study. Required: a. 1. Calculate the per unit contribution margin for both models. sblbe 2. Which of the data above should be ignored in making the product introduction decision? For what reason? 3. Prepare a financial analysis and determine which of the two models should be introduced. 4. What other factors should EBP consider before a final decision is made?
P19.38 LO19.7 Introducing a new product: manufacturer EBP Ltd is a small firm involved in the production and sale of electronic business products. The company is bidad well known for its attention to quality and innovation. During the past 15 months, a new product has been under development that allows users handheld access to email and video images. EBP named the product 'Wireless Wizard' and has been quietly designing two models: Standard and Enhanced. Development costs have amounted to $181500 and $262500, respectively. The total market demand for each model is expected to be 40000 units, and management anticipates being able to obtain the following market shares: Standard, 25 per cent; Enhanced, 20 per cent. Forecast data follow: Projected selling price Enhanced $495.00 Standard $375.00 Production cost per unit: Direct material 42.00 67.50 Direct labour 22.50 30.00 Variable overhead 36.00 48.00 Fixed overhead 54.00 72.00 Marketing and advertising per product line 195000 300000 Sales salaries per product line 85500 85.500 Sales commissions* Calculated on the basis of sales dollars. 10% 10% 93019 Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with EBP paying $34 500 for an in-depth market study. Required: a. 1. Calculate the per unit contribution margin for both models. sblbe 2. Which of the data above should be ignored in making the product introduction decision? For what reason? 3. Prepare a financial analysis and determine which of the two models should be introduced. 4. What other factors should EBP consider before a final decision is made?
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter12: Integer Linear Optimization_models
Section: Chapter Questions
Problem 9P: Galaxy Cloud Services operates several data centers across the United States containing servers that...
Related questions
Question
Im doing it as homework for extra studies, this isnt an assignment, i need help
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning