Johnson and Gomez, Incorporated, 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 $189,000 and $270,000, respectively. The total market demand for each model is expected to be 45,000 units, and management anticipates being able to obtain the following market shares: Basic, 20 percent; Enhanced, 15 percent. Forecasted data follow. Projected selling price Per-unit production costs: Direct material Direct labor Variable overhead Basic $ 370.00 47.00 25.00 41.00 200,000 Enhanced $ 470.00 15% 75.00 35.00 53.00 325,000 Marketing and advertising (fixed but avoidable) Sales commissions" *Computed on the basis of sales dollars. 4 Since the start of development work on the Wireless Wizard, advances in technology have altered 20%

Johnson and Gomez, Incorporated, 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 $189,000 and $270,000, respectively. The total market demand for each model is expected to be 45,000 units, and management anticipates being able to obtain the following market shares: Basic, 20 percent; Enhanced, 15 percent. Forecasted data follow. Projected selling price Per-unit production costs: Direct material Direct labor Variable overhead Basic $ 370.00 47.00 25.00 41.00 200,000 Enhanced $ 470.00 15% 75.00 35.00 53.00 325,000 Marketing and advertising (fixed but avoidable) Sales commissions" *Computed on the basis of sales dollars. 4 Since the start of development work on the Wireless Wizard, advances in technology have altered 20%

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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