this assessment correct? what would be the interpretation to answer this question? If capacity for producing the A2B timer component is in fact limited, and therefore each sale of the household timer will eliminate the sale of an A2B component, how would you measure the household timer’s profitability? Estimation of Opportunity CostIn assessing the profitability of the new timer, we take into account the opportunity costassociated with the A2B model. This is because the production line's capacity may be utilizedand allocated to the new timer. Our estimation indicates production line's capacity will bededicated to the new product. Consequently, the opportunity cost is illustrated in Exhibit 8.+Total manufacturing costSelling, general andadministration (15% of cost)Total costTarget profit (10% of cost)Factory PriceEstimated unitsSalesTotal variable costContribution marginContribution margin ratioTotal direct fixed costsOpportunity CostProduct-line profitA2B Model4.400.665.060.5065.566Heading 1 3451608192116501104117881704720.431093186$7,077,287New Household timers11.601.7413.341.33414.68100,000014680000851440061656000.58843,010$2,241,282$3,081,308

Opportunity cost refers to the value of the next best alternative that is forgone or sacrificed when…

this assessment correct? what would be the interpretation to answer this question? If capacity for producing the A2B timer component is in fact limited, and therefore each sale of the household timer will eliminate the sale of an A2B component, how would you measure the household timer’s profitability?

this assessment correct? what would be the interpretation to answer this question? If capacity for producing the A2B timer component is in fact limited, and therefore each sale of the household timer will eliminate the sale of an A2B component, how would you measure the household timer’s profitability?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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