Pedal heads has a new opportunity. Instead of just selling bicycles, they could sell electric motocross bicycles.
Question:
Pedal heads has a new opportunity. Instead of just selling bicycles, they could sell electric motocross bicycles. Estimates suggest that the selling price of the new product would be $9,200 each and that sales could reach 120 units. In order to do this, Pedal heads would have to spend an additional $350,000 on one time factory improvements. The cost of each electric motocross bicycle will be $6,500. The expansion into e-bikes is expected to reduce sales of bicycles by 305 units but balanced by an increase in selling price of $800 per unit. What is the impact to operating profit and should Pedal heads expand to 2 products?
Question 22Answer
a. $41,000 increase, yes
b. $309,000 increase, yes
c. Ignore the nerdy accounting analysis, just go for it dude!!
d. $41,000 decrease, no e. $630,000 increase, no
Spreadsheet Modeling & Decision Analysis A Practical Introduction to Management Science
ISBN: 978-0324656633
5th edition
Authors: Cliff T. Ragsdale