Reference no: EM13339788

Exercise 1

Breakeven time for new product development - ... Greyson Technology's launch of a new digital communication device.  Suppose that Greyson reduced the quarterly spending on product development in panel A, which delayed launching the new product for two quarters, at which time the selling price and sales volume would be lower.  Specifically, assume the following:

__________________________Y1, Q1              Y1, Q2   Y1, Q3   Y1, Q4   Y2, Q1   Y2, Q2   Y2, Q3   Y2, Q4   Y3,Q1

Market research (000)                   $(100)   ($50)

Product development (000)                        ($80)      ($150)   ($150)   ($150)   ($150)   ($150)   ($150)   ($60)

__________________________Y3, Q1              Y3, Q2   Y3, Q3   Y3, Q4   Y4, Q1   Y4, Q2   Y4, Q3   Y4, Q4  

Selling price                                       $19         $18         $18         $17         $17         $16         $15         $15        

Sales quantity (000)                          25            35           45           50           50           50           40           30       

Assuming that the cost per unit remains $10 and the MSDA expenses remain $120,000 per quarter, determine the different between the breakeven time metrics under the initial assumptions in panel A and the new assumptions.

Exercise 2

Target costing: unit cost - Calcutron Company is contemplating introducing a new type of calculator to complement its existing line of scientific calculators.  The target price of the calculator is $75; annual sales volume of the new calculator is expected to be 500,000 units.  Calcutron has a 15% return-on-sales target.

Compute the unit target cost per calculator.