om Roberts, CEO of lawnmower manufacturer Grassy Knowles, who has licensed software from the makers of Roomba in order to create the first self-directed, programmable lawnmower; he has branded this new mower the Goat. Knowles anticipates that fixed costs, including the plant and robotic assembly, will be $18 million for the first year. Projected sales for the first year are 90,000 units. Unit variable costs, including all mechanical and technical parts plus the licensing fee (contracted on a per-unit basis), add up to $1100 per mower. Using these parameters, project the price Tom would need to charge to breakeven. Show all calculations .
Grassy Knowles already sells two other models of mowers: an upscale, best-selling rider mower called the Ben Hur (list price at $3199), and a mid-level self-propelled mower called the Weekender (list price at $1899). Knowles wants to conduct a cannibalization analysis to investigate whether the introduction of the Goat will positively or negatively influence the company’s bottom line.
R&D has begun cannibalization analysis below. Finish the work (and SHOW ALL WORK for full credit) and discuss whether the introduction of the Goat project is economically viable for the company as a whole.
I have come up with a break even price of $13 per unit
Next year, without the Goat |
|||||
Product |
p |
uvc |
Contrib/unit |
Unit Sales |
Contribution |
Ben Hur |
3199 |
150000 |
|||
Weekender |
1899 |
120000 |
|||
Next year, with the Goat |
|||||
Product |
p |
uvc |
Contrib/unit |
Unit Sales |
Contribution |
Ben Hur |
3199 |
||||
Weekender |
1899 |
||||
Goat |
90000 |
Calculate Break Even Price, Sale Price and Cannibalization Analysis as shown below -
Formula used in the above worksheet is shown below -
I hope this will help you in your task.
om Roberts, CEO of lawnmower manufacturer Grassy Knowles, who has licensed software from the makers of...
Tony Knowles, CEO of lawnmower manufacturer Grassy Knowles LLC, has licensed software from the makers of Roomba in order to create the first self-directed, programmable lawnmower; he has branded this new mower the Goat. Knowles anticipates that fixed costs, including the plant and robotic assembly, will be $18 million for the first year. Projected sales for the first year are 90,000 units. Unit variable costs, including all mechanical and technical parts plus the licensing fee (contracted on a per-unit basis),...
Tom Roberts, CEO of lawnmower manufacturer Grassy Knowles, who has licensed software from the makers of Roomba in order to create the first self-directed, programmable lawnmower; he has branded this new mower the Goat. Knowles anticipates that fixed costs, including the plant and robotic assembly, will be $18 million for the first year. Projected sales for the first year are 90,000 units. Unit variable costs, including all mechanical and technical parts plus the licensing fee (contracted on a per-unit basis),...
Connelly Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Because her business has grown, Jan De Janey, the president, believes she needs an aggressive advertising campaign next year to maintain the company's growth. To prepare for the growth, the accountant prepared the following data for the current year. $ 13.50 14.50 6.00 34.00 $ Variable costs per Ice cream maker Direct labor Direct materials Variable overhead Total...
Connelly, Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Since her business has grown, Jan DeJaney, the president, believes she needs an aggressive advertising campaign next year to maintain the company's growth. To prepare for the growth, the accountant prepared the following data for the current year: Variable costs per ice cream maker Direct labor Direct materials Variable overhead $ 17.00 20.50 8.50 Total variable costs $...
Connelly Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years Because her business has grown, Jan De Janey, the president, believes she needs an aggressive advertising campaign next year to maintain the company's growth. To prepare for the growth, the accountant prepared the following data for the current year: $ eBook 17.00 20.50 8.50 46.00 $ Variable costs per ice cream maker Direct labor Direct materials Variable overhead...
Connelly Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Because her business has grown, Jan De Janey, the president, believes she needs an aggressive advertising campaign next year to maintain the company's growth. To prepare for the growth, the accountant prepared the following data for the current year: $ 16.00 19.00 8.00 $ 43.00 Variable costs per ice cream maker Direct labor Direct materials Variable overhead Total...
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Connelly Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Because her business has grown, Jan De Janey, the president, believes she needs an aggressive advertising campaign next year to maintain the company's growth. To prepare for the growth, the accountant prepared the following data for the current year: $ 23.00 27.50 11.50 $ 62.00 Variable costs per ice cream maker Direct labor Direct materials Variable overhead Total...