SavedHelpSaveDuring the past 15 montns, a new proauct nas been under deveiopment that allows users improvea access to e-mail anavideo images. Johnson and Gomez code named the product the Wireless Wizard and has been quietly designing twomodels: Basic and Enhanced. Development costs have amounted to $190,500 and $271,500, respectively. The totalmarket demand for each model is expected to be 46,000 units, and management anticipates being able to obtain thefollowing market shares: Basic, 30 percent; Enhanced, 25 percent. Forecasted data follow.BasicEnhancedProjected selling pricePer-unit production costs:Direct materialDirect labor$ 375.00$ 475.0048.0076.5025.5036.00Variable overhead42.0054.00Marketing and advertising (fixed but avoidable)Sales commissions*201,00010%330,00010%*Computed on the basis of sales dollars.Since the start of development work on the 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.lConsultants confirmed thisfact not too long ago, with Johnson and Gomez paying $35,100 for an in-depth market study. Sales salaries (excludingcommission) will be $88,500 no matter which product is sold. The marketing and advertising costs indicated for eachproduct are incurred only if that product is sold. Other fixed overhead is expected to be the same, regardless of whichproduct is introduced.3-a. Prepare a financial analysis and determine which of the two models should be introduced.3-b. The company would be advised to select the Enhanced model or Basic model.< Prev8 9of 14Next >

Introduction: Production costs, also known as product costs, are incurred by a firm when it creates…

Answered: 3-a. Prepare a financial analysis and…

3-a. Prepare a financial analysis and determine which of the two models should be introduced. 3-b. The company would be advised to select the Enhanced model or Basic model.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 2PB: Mortech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and...

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