Question: Apple is planning to develop a new augmented reality (AR) device with the following financial implications: Development Costs: $2.5 billion Production Costs per Unit: $300

  • Apple is planning to develop a new augmented reality (AR) device with the following financial implications:
    • Development Costs: $2.5 billion
    • Production Costs per Unit: $300
    • Selling Price per Unit: $800
    • Estimated Annual Sales: 10 million units
    • Fixed Costs: $800 million annually
  • Requirements:
    1. Calculate the total annual revenue and production cost for the new AR device.
    2. Prepare an income statement for the first year.
    3. Analyze the contribution margin ratio for the AR device.
    4. Discuss the strategic benefits of the AR device for Apple’s product portfolio.
    5. Evaluate the market risks and competition for the AR device.

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