Optics manufactures an underwater digital camera. The company’s newest model is very popular, but it has an inventory of 6,000 old models for which there is little demand. The company is considering the following options for disposing of these old models. Sell them to a discount mail-order company at a unit price of $580. Convert them to high water pressure resistant models at a remanufacturing cost of $200 per unit. These new models then could be sold to camera stores for $750 each. The old models had been manufactured at a cost of $500 per unit. Required: Perform an incremental analysis of the revenue, costs, and profit resulting from converting the old models to new models as compared with selling them to the mail-order firm.
Optics manufactures an underwater digital camera. The company’s newest model is very popular, but it has an inventory of 6,000 old models for which there is little demand. The company is considering the following options for disposing of these old models. Sell them to a discount mail-order company at a unit price of $580. Convert them to high water pressure resistant models at a remanufacturing cost of $200 per unit. These new models then could be sold to camera stores for $750 each. The old models had been manufactured at a cost of $500 per unit. Required: Perform an incremental analysis of the revenue, costs, and profit resulting from converting the old models to new models as compared with selling them to the mail-order firm.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Optics manufactures an underwater digital camera. The company’s newest model is very popular, but it has an inventory of 6,000 old models for which there is little demand. The company is considering the following options for disposing of these old models. Sell them to a discount mail-order company at a unit price of $580. Convert them to high water pressure resistant models at a remanufacturing cost of $200 per unit. These new models then could be sold to camera stores for $750 each. The old models had been manufactured at a cost of $500 per unit. Required: Perform an incremental analysis of the revenue, costs, and profit resulting from converting the old models to new models as compared with selling them to the mail-order firm.
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