Problem 12-01 (Algorithmic) PortaCom manufactures notebook computers and related
ID: 431632 • Letter: P
Question
Problem 12-01 (Algorithmic)
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 20,000 units. Using estimates of $38 per unit for the direct labor cost and $94 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 $100 per unit. In addition, the analyst suggests that a sales volume of 10,500 units is more realistic. Using the most likely value of $38 per unit for the direct labor cost, what is the first-year profit using the financial analyst's estimates?
$
Explanation / Answer
A) variable cost =(38+94)*20000=$2640000
total cost =2640000+300000+700000=$3640000
total revenue =237*20000=$4740000
Profit =$1100000
B) Variable cost=(38+100)*10500=$1449000
Total cost =1449000+300000+700000=$2449000
Revenue cost = 237*10500=$2488500
profit=2488500-2449000=$39500.
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