A manager must decide whether to introduce a new product (Model X). Sales projections indicate that the new product would achieve a sales volume of 5,000 units in its first year. One half of the first year's volume would come from competitors' brands. However, a market research study indicates that 30 percent of the total Model X expected sales volume would come from the higher priced Model A, while the remaining 20 percent will come from the economy priced Model B. See the projected sales volume, selling price, and unit variable cost for each model in the table below. The fixed costs associated with the new product amount to $4 million. Should the manager add Model X to the product line? In your show-your-work document, explain your rationale. Model Unit Selling Price Unit Variable Cost Projected Sales Volume Model A $5,900 $2,200 4,000 Model B $2,500 $1,200 6,000 New Model $3,900 $1,200 5,000 O No O Yes

A manager must decide whether to introduce a new product (Model X). Sales projections indicate that the new product would achieve a sales volume of 5,000 units in its first year. One half of the first year's volume would come from competitors' brands. However, a market research study indicates that 30 percent of the total Model X expected sales volume would come from the higher priced Model A, while the remaining 20 percent will come from the economy priced Model B. See the projected sales volume, selling price, and unit variable cost for each model in the table below. The fixed costs associated with the new product amount to $4 million. Should the manager add Model X to the product line? In your show-your-work document, explain your rationale. Model Unit Selling Price Unit Variable Cost Projected Sales Volume Model A $5,900 $2,200 4,000 Model B $2,500 $1,200 6,000 New Model $3,900 $1,200 5,000 O No O Yes

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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