Submit your complete handwritten solution with graph. The Gigadigit Manufacturing Inc. is considering to produce a new product. The following data have been provided to managemer Sales price $17.50/unit Equipment cost $250,000 Incremental overhead cost $50,000/year Sales and marketing cost S150,000/year Operating and maintenance cost $25/operating hour Production time/1.000 units 100 hours Packaging and shipping cost S0.50/unit Planning horizon 5 years Minimum attractive rate of return 15% The managers would like to know the viability of this product and how it would roll out in sales. (a) To give them basis and insight what is the break-even value of units that must be sold annually to keep the product viable? (b) If the target revenue is from 30,000 units sold, what is the expected profit?
Submit your complete handwritten solution with graph. The Gigadigit Manufacturing Inc. is considering to produce a new product. The following data have been provided to managemer Sales price $17.50/unit Equipment cost $250,000 Incremental overhead cost $50,000/year Sales and marketing cost S150,000/year Operating and maintenance cost $25/operating hour Production time/1.000 units 100 hours Packaging and shipping cost S0.50/unit Planning horizon 5 years Minimum attractive rate of return 15% The managers would like to know the viability of this product and how it would roll out in sales. (a) To give them basis and insight what is the break-even value of units that must be sold annually to keep the product viable? (b) If the target revenue is from 30,000 units sold, what is the expected profit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Submit your complete handwritten solution with graph.
The Gigadigit Manufacturing Inc. is considering to produce a new product. The following data have been provided to managemer
Sales price
$17.50/unit
Equipment cost
$250,000
Incremental overhead cost
$50,000/year
Sales and marketing cost
S150,000/year
Operating and maintenance cost $25/operating hour
Production time/1,000 units
100 hours
Packaging and shipping cost
S0.50/unit
Planning horizon
5 years
Minimum attractive rate of return 15%
The managers would like to know the viability of this product and how it would roll out in sales.
(a) To give them basis and insight what is the break-even value of units that must be sold annually to keep the product viable?
(b) If the target revenue is from 30,000 units sold, what is the expected profit?
(C) If the profit drops by 13% due to equipment replacement, how much must have been the cost of the alternative equipment?
(d) Provide graph for (a)
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