Strategy Games, Inc. (SGI) has designed the ultimate business board game. The game has been on the market for 10 years and the company has sold more than 20 million games. The game€™s wholesale price is $9 and the suggested retail price is $15. SGI has computed the cost of producing the game to be $5.40. The cost includes direct materials, direct labor, and overhead. SGI€™s management has decided that the time is right to produce a special edition of the game in a mahogany collector€™s box with a special game board and new, limited edition game pieces. Your job is to set a new sales price and decide whether the special game should be produced. You receive the following report from the accounting department to help you with your decision:

Required
A. Is the previous cost information sufficient to determine a sales price for each game? Why or why not?
B. What qualitative factors should be considered in deciding whether to produce and sell the specialgame?

Transcribed Image Text:

Present Game $1.25 2.00 2.15 $5.40 Special Game (Estimated) $30.50 3.50 2.15 $36.15 Direct materials Direct labor Overhead