PortaCom manufactures notebook computers and related equipment. PortaCom's product design group developed a prototype for a new

Question

1 month ago

9

PortaCom manufactures notebook computers and related equipment. PortaCom's product design group developed a prototype for a new

high-quality portable printer. The new printer features an innovative design and has the potential to capture a significant share of the portable printer market. Preliminary marketing and financial analyses provided the following selling price, first-year administrative cost, and first-year advertising cost:
Selling Price $284 per unit
Administrative Cost $500,000
Advertising Cost $700,000
In the simulation model for the PortaCom problem, the preceding values are constants and are referred to as parameters of the model.
(a) An engineer on the product development team believes that first-year sales for the new printer will be 18,500 units. Using estimates of $50 per unit for the direct labor cost and $88 per unit for the parts cost, what is the first-year profit using the engineer's sales estimate?
(b) The financial analyst on the product development team is more conservative, indicating that parts cost may well be $101 per unit. In addition, the analyst suggests that a sales volume of 9,500 units is more realistic. Using the most likely value of $50 per unit for the direct labor cost, what is the first-year profit using the financial analyst's estimates?

Business

1 answer:

Free_Kalibri [3.7K] · Answer 1 · 2026-03-29T18:43:12+03:00

Answer:

Below are the instructions.

Explanation:

Provided information includes:

Selling Price $284 for each unit

Fixed Administrative Cost of $500,000

Advertising Expense $700,000

(a) Units= 18,500

Direct labor at $50 per unit

Direct materials cost $88 each

Sales Revenue= 18,500*284= 5,254,000

Total Variable Costs= (50 + 88)*18,500= (2,553,000)

Contribution margin equals 2,701,000

Administrative Expenses = (500,000)

Advertising Expenses = (700,000)

Net operating profit is 1,501,000

B)Units= 9,500

Direct labor costs at $51

Direct material cost is $101

Sales Revenue= 9,500*284= 2,698,000

Total Variable Costs= (51 + 101)*9,500= (1,444,000)

Contribution margin equals 1,254,000

Fixed Administrative Cost = (500,000)

Advertising Cost = (700,000)

Net operational profit is 54,000