Introducing a New Prodct to Market
Not what you're looking for?
Company X is a small firm innovative in the production and sale of electrical business products. The company is well known for its attention to quality and innovations.
During the past 15 months, a new product has been under development that allows users handheld access to email and video images.
Company X code named the product the Wireless Wizard and had been quietly designing two models; BASIC and ENHANCED. Development costs have amounted to 121,000 and 175,000 respectively.
The total market demand for each model is expected to be 40,000 units, and management anticipates being able to obtain the following market shares; basic 25%, enhanced 20%
Forecasted data flow:
Basic Enhanced
Projected selling price 250 330
Per unit production costs:
Direct materials 28 45
Direct labor 15 20
Variable overhead 24 32
Fixed overhead 36 48
Marketing an advertise 130,000 200,000
Sales salaries 57,000 57,000
Sales Commissions 10% 10%
Computed on the basis of sales dollars
Since the start of development Wireless Wizard, advances in technology have altered the market somewhat and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with Company X paying 23, 000 for an in-depth market study.
1. Compute the per unit contribution margin for both models
2. Which of the data in the table above should be ignored in making the product introduction decision? For what reason?
3. Prepare a financial analysis and determine which of the two models should be introduced.
4. What other factors should Company X consider before a final decision is made?
Purchase this Solution
Education
- BSc, Dokuz Eylul University
- MBA, Texas A&M University-Kingsville
Recent Feedback
- "Thanks"
- "Thanks"
- "This is a great help...Thank you"
- "Thanks for the advice!"
- "Oh my gosh u are awesome... A++"
Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.