Purchase Solution

Addion of the new model

Not what you're looking for?

Ask Custom Question

Video Concepts, Inc. (VCI) manufactures a line of videocasette recorders (VCRs) that are distributed to large retailers. The line consists of three models of VCRs. The following data are available regarding the models:
VCR Selling Variable Cost
Model Price per unit per unit Demand/Year (units)
----- ----------------- ----------- -----------------------
LX1 $175 $100 2,000
LX2 250 125 1,000
LX3 300 140 500

VCI is considering the addition of a fourth model to its line of VCRs. This model would be sold to retailers for $375.The variable cost of this unit is $225. The demand for the new model LX4 is estimated to be 300 units per year. Sixty percent of these unit sales is expected to come from other models already being manufactured by VCI (10 percent from model LX1, 30 percent from model LX2, and 60 percent from model LX3). VCI will add a fixed cost of $20,000 to add the new model to the line.

Based on the above data, explain why VCI should or should not add the new model LX4 to its line of VCRs?

Purchase this Solution
Solution Summary

Word file contains calculations and explain why VCI should or should not add the new model LX4 to its line of VCRs.

Solution Preview

Hi,

Please see response to your posting as given below and in the attached file.
The computations are given in the attached file.

The new product needs to be evaluated on the basis of incremental income it can bring. Incremental income here means net profit added by the new product. The new product LX4 has contribution ...

Purchase this Solution
Free BrainMass Quizzes
SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Introduction to Finance

This quiz test introductory finance topics.

View More Free Quizzes
Related BrainMass Solutions

  • Direct or Indirect Foreign Investment

    This is because when the investors invest money into a foreign country, it will be subject to exchange rate risk in addion to the normal investment risks.

  • Differential equation word problems

    At the end of nth year: at the end of 1st year: m(1) = 1000*(1-1/3) = 1000*2/3 After addition of new fishes, m(1) = 1000*(2/3) + 500 At the end of 2nd year: m(2) = 1000*(2/3)^2 + 500*(2/3) Just after the addion of fishes second time: m(2) =1000

  • Analyzing the impact of an addition of a new model

    VCI will incur a fixed cost of $20,000 to add the new model in the line. Based on the proceeding data, should VCI add the new Model LX4 to its line of VCRs? Why? Please refer attached file for better clarity of tables.

  • Challenges to business model design and innovation

    Typically, leaders design their new business model according to the creation of new revenue streams and new value to stakeholders then they seek comments from external stakeholders before they finalize their new business model innovation.

  • Understanding Forecasting models as they apply to products

    Following are the reason to use this model for bathing suit demand: Short time horizon, Low complexity of model Low cost of model Fair accuracy Low data requirements Forecasting Model for Estimating Demand of New Houses: Demand for new

  • eCommerce and Porters Five Forces

    510809 eCommerce and Porters Five Forces Choose one of the five competitive forces in Porter's model. Describe a new opportunity and a new threat due to e-commerce via the Internet for a specific industry of your choosing.

  • Proposed New Business Model for Google

    630780 Proposed New Business Model for Google Propose a new business model for Google.

  • Contemporary Organizational Theory Models

    Answer the following questions about your model: ? What will the new name of your theory be? For example, your new theory might be called the "rational-ecology-dependence" model or the "population-cost-contingency" model. ?

  • Rappaport's elegant shareholder valuation model

    Journal of Applied Corporate Finance, Vol. 14, No. 3, Fall 2001 In the year 1986 Rappaport published a book named "Creating Shareholder Value" can be said to be the beginning of the current movement of shareholder value management as he used a new model

View More Related Solutions