PortaCom manufactures notebook computers and related equipment. PortaCom's product design group developed a prototype for a new
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Question:
PortaCom manufactures notebook computers and related equipment. PortaCom's product design group developed a prototype for a new high-quality portable printer. The new printer features an innovative design and has the potential to capture a significant share of the portable printer market. Preliminary marketing and financial analyses provided the following selling price, first-year administrative cost, and first-year advertising cost:
Selling price | = | $284 per unit |
Administrative cost | = | $500,000 |
Advertising cost | = | $700,000 |
In the simulation model for the PortaCom problem, the preceding values are constants and are referred to as parameters of the model.
(a) | An engineer on the product development team believes that first-year sales for the new printer will be 18,500 units. Using estimates of $50 per unit for the direct labor cost and $88 per unit for the parts cost, what is the first-year profit using the engineer's sales estimate? |
$ |
(b) | The financial analyst on the product development team is more conservative, indicating that parts cost may well be $101 per unit. In addition, the analyst suggests that a sales volume of 9,500 units is more realistic. Using the most likely value of $50 per unit for the direct labor cost, what is the first-year profit using the financial analyst's estimates? |
$ |
Related Book For
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton
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