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What is better figure for this about in between \$8.00 and \$14.70?? Not sure...thanks

At a factory price of \$8.00 Frank figured they could sell 50,000 timers. He figured there should be a \$50,000 advertising budget that would be spent regardless of sales volume. He figured the \$1.00 per unit for general admin. And selling expense would just cover the advertsing cost and could be allocated to advertsing since other SG&A costs would be fixed.
When Frank showed his proposal Jim, the latter flatly disagreed with the idea of cutting overhead."you start doing that" he said, " and pretty soon you've got lots of volume and no profit" . You can't just wave your calculator like a wand over the numbers and have a product actually cost less.Furthermore, I think you haven't figured in the value of the product options. There is no another time like this on the market. I think we can put a factory price of \$14.70 on it and customers will be eager to buy it at \$29.40.
Tom, who had heard most of the discussion said he thought the \$14.70 factory price was a much better idea. "Look", he said to Frank,"if you breakdown of fixed and variable costs is right- and I think is probably OK for the short run- then we'll only need to sell some smaller number of units at \$14.70 to be as well off as we would be with your plan".
'Well" said Jim, " That may be right, but the more I look at this the more it seems to me that a little knowledge is a dangerous thing here. I do not think we really know how much the new timer is going to cost either in the short run or the long run".

Question

If, as Jim says, neither \$14.70 nor \$8.00 represents "the cost " of the ne timer, how would better figure be computed??

#### Solution Preview

Okay, here goes, from the information provided:

Sales of 50,000 units at the factory price of \$8.00 per unit yields a production cost of \$400,000