PortaCom manufactures notebook computers and related equipment. PortaCom\'s prod
ID: 419605 • Letter: P
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:
In the simulation model for the PortaCom problem, the preceding values are constants and are referred to as parameters of the model.
An engineer on the product development team believes that first-year sales for the new printer will be 19,500 units. Using estimates of $50 per unit for the direct labor cost and $87 per unit for the parts cost, what is the first-year profit using the engineer's sales estimate?
$ _______________________
The financial analyst on the product development team is more conservative, indicating that parts cost may well be $103 per unit. In addition, the analyst suggests that a sales volume of 9,000 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?
$ _____________________
Explanation / Answer
the estimated sales are= 19500 units
the variable cost per unit= 50+87= $137
fixed cost= 350,000+550,000= $900,000
at this level the revenues and profit are:
revenue is= 19500*258= $5,031,000
the costs= 19500*137+900,000= 2,671,500+900,000= 3,571,500
profit= $5,031,000- 3,571,500= $1,459,500
2. now the variable cost becomes= $50+103= $153
fixed cost= 350,000+550,000= $900,000
at this level the revenues and profit are:
revenue is= 19500+9000*258= $7,353,000
the costs= 28500*153+900,000= 4,360,500+900,000= $5,260,500
now the profit will be= $7,353,000- $5,260,500= $2,092,500