A reliable sales forecast has been obtained indicating that the Special Products Company (see Section 1.2) would be able to sell 30,000 iWatches, which appears to be enough to justify introducing this new product. However, management is concerned that this conclusion might change if more accurate estimates were available for the research-and-development cost, the marginal production cost, and the unit revenue. Therefore, before a final decision is made, management wants what-if analysis done on these estimates.
Use the spreadsheet from Figure 1.3 (see this chapter's Excel files) and trial-and-error to perform what-if analysis by independently investigating each of the following questions.
a. How large can the research-and-development cost be before the watches cease to be profitable?
b. How large can the marginal production cost be before the watches cease to be profitable?
c. How small can the unit revenue be before the watches cease to be profitable?