(LO4) 8-32 Breakeven time for new product development Refer to Exhibit 8-6 regarding Greyson Tech- nology's...

Transcribed Image Text:

(LO4) 8-32 Breakeven time for new product development Refer to Exhibit 8-6 regarding Greyson Tech- nology's launch of a new digital communications device. Suppose that Greyson reduced the quar- terly spending on product development in panel A, which delayed launching the new product for two quarters, at which time the selling price and sales volume would be lower. Specifically, assume the following: YEAR 1 YEAR 2 YEAR 3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Market research (000) .. $(100) $(50) Product development (000) $(80) $(150) $(150) $(150) $(150) $(150) $(150) $(60) YEAR 3 YEAR 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Selling price $18 $17 $17 $16 $15 $15 $15 $15 Sales quantity (000) . . . 20 30 40 45 45 35 30 20 After Y4, Q4, the competitive price is expected to remain at $15 and the maximum sales will be 20,000 units. Required Assuming that the cost per unit remains $10 and the MSDA expenses remain $120,000 per quar- ter, determine the breakeven time metric under the new assumptions. (LO4) 8-32 Breakeven time for new product development Refer to Exhibit 8-6 regarding Greyson Tech- nology's launch of a new digital communications device. Suppose that Greyson reduced the quar- terly spending on product development in panel A, which delayed launching the new product for two quarters, at which time the selling price and sales volume would be lower. Specifically, assume the following: YEAR 1 YEAR 2 YEAR 3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Market research (000) .. $(100) $(50) Product development (000) $(80) $(150) $(150) $(150) $(150) $(150) $(150) $(60) YEAR 3 YEAR 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Selling price $18 $17 $17 $16 $15 $15 $15 $15 Sales quantity (000) . . . 20 30 40 45 45 35 30 20 After Y4, Q4, the competitive price is expected to remain at $15 and the maximum sales will be 20,000 units. Required Assuming that the cost per unit remains $10 and the MSDA expenses remain $120,000 per quar- ter, determine the breakeven time metric under the new assumptions.