John Deere Tractors is considering the introduction of a mid-priced version of the firm's DC6900 lawn and gardentractor product line the DC6900-X. The DC6900-X would sell for $3,900 with unit variable costs of $1,800. Projectionsmade by an independent marketing research firm indicate that the DC6900-X would achieve a sales volume of 500,000units next year, in its first year of commercialization. One-half of the first year's volume would come from competitors'products and market growth. However, a consumer research study indicates that 30 percent of the DC6900-X sales volumewould come from the higher-priced DC600-Omega tractor, which sells for $5,900 (with unit variable costs of $2,200).Another 20 percent of the DC00-X sales volume would come from the economy-priced DC6900-Alpha tractor, priced at$2,500 (with unit variable costs of $1,200). The DC6900-Omega unit volume is expected to be 400,000 units next year,and the DC6900-Alpha is expected to achieve a 600,000-unit sales level. The fixed costs of launching the DC6900-X havebeen forecast to be $2 million during the first year of commercialization. Should the DC6900-X model to the line of lawnand garden tractors? Why?

1. Calculate the profit contribution of DC6900-X: - Sales volume: 500,000 units - Price: $3,900 -…

Answered: John Deere Tractors is considering the…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 29P: Nico Parts, Inc., produces electronic products with short life cycles (of less than two years)....

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