**Johnson and Gomez, Inc. Case Study****Background:**Johnson and Gomez, Inc. is a small firm specializing in the production and sale of electronic business products, renowned for its focus on quality and innovation. Over the past 15 months, the company has developed a new product, the Wireless Wizard, which enhances user access to e-mail and video images. Two models have been designed: Basic and Enhanced.**Development Costs:**- Basic: $207,000- Enhanced: $288,000**Projected Market Demand:**- 57,000 units**Market Share:**- Basic: 25%- Enhanced: 20%**Forecast Data:**- **Projected Selling Price:** - Basic: $430.00 - Enhanced: $530.00- **Per-Unit Production Costs:** - *Basic Model:* - Direct Material: $59.00 - Direct Labor: $31.00 - Variable Overhead: $53.00 - *Enhanced Model:* - Direct Material: $93.00 - Direct Labor: $47.00 - Variable Overhead: $65.00- **Marketing and Advertising:** - Basic: $212,000 - Enhanced: $385,000 - *Note: These costs are fixed but avoidable.*- **Sales Commissions:** - 15% of sales dollars for both models.**Market Changes & Recommendations:**Technological advances have shifted the market. Only one model can be introduced, confirmed by a $36,200 market study. Sales salaries (exclusive of commissions) are $94,000 irrespective of the chosen product. Marketing and advertising costs apply only if the product is sold.**Problem 14-46 Part 3: Financial Analysis**3-a. Conduct a financial analysis to determine which model to introduce.3-b. Recommend whether to select the Enhanced model or Basic model.**Financial Analysis Insight:**- A table is provided for calculating Total Contribution Margin, subtracting Marketing and Advertising, to derive Income for each model.- Calculations should use rounded figures up to 2 decimal places to ensure accuracy in decision-making.These details provide insights into the financial considerations Johnson and Gomez, Inc. must weigh when deciding which model to introduce to the market.

Corporation may face a situation where it has two alternatives and it needs to select one. The…

Johnson and Gomez, Inc., is a small firm involved in the production and sale of electronic business products. The company is well known for its attention to quality and innovation. During the past 15 months, a new product has been under development that allows users improved access to e-mail and video images. Johnson and Gomez code named the product the Wireless Wizard and has been quietly designing two models: Basic and Enhanced. Development costs have amounted to $207,000 and $288,000, respectively. The total market demand for each model is expected to be 57,000 units, and management anticipates being able to obtain the following market shares: Basic, 25 percent; Enhanced, 20 percent. Forecasted data follow. Projected selling price Per-unit production costs: Direct material Direct labor Variable overhead Marketing and advertising (fixed but avoidable) Sales commissions* Basic $ 430.00 Problem 14-46 Part 3 59.00 31.00 53.00 212,000 15% Enhanced $ 530.00 *Computed on the basis of sales dollars. Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with Johnson and Gomez paying $36,200 for an in-depth market study. Sales salaries (excluding commission) will be $94,000 no matter which product is sold. The marketing and advertising costs indicated for each product are incurred only if that product is sold. Other fixed overhead is expected to be the same, regardless of which product is introduced. Complete this question by entering your answers in the tabs below. 93.00 47.00 65.00 385,000 15% 3-a. Prepare a financial analysis and determine which of the two models should be introduced. 3-b. The company would be advised to select the Enhanced model or Basic model.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q