Several years ago. cosmetics manufacturer Elizabeth Arden announced its decision to cancel the launch - including a $12 million advertising campaign to announce the product plus $1.7 million in distribution costs- of Elizabeth Taylor's Black Pearls perfume despite having already spent $15 million on development, marketing, and inventory. Arden should have gone ahead with the planned launch if the anticipated revenue from sales of existing inventory exceeded at least O $13.7 million O $12 million O s15 million O $1.7 million O s28.7 million

Several years ago. cosmetics manufacturer Elizabeth Arden announced its decision to cancel the launch - including a $12 million advertising campaign to announce the product plus $1.7 million in distribution costs- of Elizabeth Taylor's Black Pearls perfume despite having already spent $15 million on development, marketing, and inventory. Arden should have gone ahead with the planned launch if the anticipated revenue from sales of existing inventory exceeded at least O $13.7 million O $12 million O s15 million O $1.7 million O s28.7 million

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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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $815 per set and have a variable cost of $365 per set. The company has spent $150,000 for a marketing study that determined the company will sell 55,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 10,000 sets of its high-priced clubs. The high-priced clubs sell at $1,345 and have variable costs of $730. The company will also increase sales of its cheap clubs by 12,000 sets. The cheap clubs sell for $445 and have variable costs of $210 per set. The fixed costs each year will be $9.45 million. The company has also spent $1 million on research and development for the new clubs. The plant and equipment required will cost $39.2 million and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1.85 million that will be returned at the end of the project. The tax rate is 25 percent, and the…