Carizick Co manufactures gaming products. It has created a new games consolecalled the QpBox which is about to be launched. Demand for the QpBox isanticipated to be high.The product life cycle of the QpBox is expected to be three years with 300,000 unitsforecast to be sold during its first year. Sales volumes are expected to decrease by75,000 units in each subsequent year. Production volumes will be based onexpected demand levels.The following costs for the QpBox have been determined:Design and developmentPre-launch advertisingAdvertising in Year 2PackagingManufacturing cost$120m$0.5m$0.4m$3 per unit$80 per unitAt a recent board meeting, the finance director said that Carizick Co should look tomaximise the profitability of the QpBox over its life cycle. The marketing directormade the comment that Carizick Co should focus on extending the maturity phase ofthe life cycle only as this stage is where the QpBox is most profitable.Contract with Zone CoCarizick Co has signed a contract with a software games retailer Zone Co to produceand package a branded game for Zone Co to sell to its customers via its retail outletsat a price of $16.50 per unit.The contract is for a total of 120,000 units over three years and the following costinformation is available for the duration of the contract:Year 1$320,000Total production and packaging costsCarizick Co have also had to purchase a machine which will only be used for thiscontract. This machine cost $500,000 to purchase up front and will cost $100,000 todispose of.Year 2$343,750Year 3$176,250 What is the average profit mark-up which Carizick Co will earn from the three-year contract withZone Co?O 37.50%O 4.50%O 12.00%O 28.13%

Carizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels.

Carizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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