Reference no: EM132520550

SmartCOM, Inc. manufactures a semiconductor chip that can turn a cellphone into a wireless access point. A wireless access point allows the phone to act as a wireless modem. The company is working with a cellphone manufacturer who is thinking of bundling the SmartCOM chip as a standard component. The cell phone manufacturer tells SmartCOM's marketing manager that phone buyers would be willing to pay $125 for a cellphone with this wireless modem functionality. This cell phone manufacturer also relays to SmartCOM their desired manufacturing cost for the cellphone including the cost to install and test the SmartCOM chip is $90. In addition, the cell phone manufacturer requires a 12 percent return on sales.

Question 1: If the target manufacturing cost can be achieved, what is the maximum amount of SG&A costs / unit the cell phone manufacturer can spend to achieve its target profit?

Group of answer choices

Option 1: $15.00

Option 2: $20.00

Option 3: $35.00

Option 4: $90.00

Question 2: Assume the cellphone manufacturer's target purchase price for the SmartCOM chip is 48% of their target manufacturing cost. SmartCOM's expects the SG&A cost for this chip will be $6.00. If SmartCOM's desired chip profit margin is 15%, what is SmartCOM's target cost for the chip?

Group of answer choices

Option 1: $6.48

Option 2: $30.72

Option 3: $37.20

Option 4: $43.20