Toledo Tire Company recently bought a new compressor which automatically fills automotive tires to specified pressure. It was specified by the compressor manufacturer that standard deviation for the fillings was 2 PSI.
January 5, 2018
The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to all hourly employees and a $4,000 increase to all software analysts with salaries less than $55,000. However, he wants to do this in 2 years. He wants you to give him two options (you do not have to recommend an option).
January 5, 2018

The CP2010-Deluxe unit volume is expected at 350,000 units next year, and the CP2010-Millenium is expected to achieve a 500,000 unit sales level. The fixed costs of launching the CP2010-X have been forecast at $2.5 million during its first year on the market. Should Mr. Doors add the CP2010-X model to the line of minicomputers?

Billy Doors, Vice President of Marketing for Qapmoc Computer, Inc., must decide whether to introduce a mid-priced version of the firm’s CP2010 minicomputer product line-the CP2010-X minicomputer. The CP2010-X would sell for $2,500, with unit variable costs of $1,450. Projections made by an independent marketing research firm indicate that the CP2010-X would achieve a sales volume of 480,000 units next year, in its first year of commercialization. 30 percent of the first year’s volume would come from competitors’ minicomputers and market growth. However, a consumer research study indicates that 40 percent of the CP2010-X sales volume would come from the higher-priced CP2010-Deluxe minicomputer, which sells for $6,450 (with unit variable costs of $2,350). Another 30 percent of the CP2010-X sales volume would come from the economy-priced CP2010-Millenium minicomputer, priced at $1,500 (with unit variable costs of $800). The CP2010-Deluxe unit volume is expected at 350,000 units next year, and the CP2010-Millenium is expected to achieve a 500,000 unit sales level. The fixed costs of launching the CP2010-X have been forecast at $2.5 million during its first year on the market. Should Mr. Doors add the CP2010-X model to the line of minicomputers?

 

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