Accouting project - OMEGA OPTICAL INDIVIDUAL PROJECT FALL...

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1 OMEGA OPTICAL INDIVIDUAL PROJECT FALL 2016 REQUIRED: Read the case and answer the questions below using the workspaces provided . To receive credit you must show your calculations and write your answers in the spaces provided. We must ask you to handwrite your answers. Hand your project in to the accounting lab 133MH during lab hours on or before Tuesday November 1st at 6PM. YOUR NAME YOUR BLACKBOARD USER ID YOUR INSTRUCTOR’S NAME YOUR RECEIPT NUMBER (lab assistants will give you this) CASE FACTS: Omega Optical is a specialist manufacturer of optical instruments. Omega has recently expanded its core product market of binoculars into making eyepieces for microscopes / telescopes, and screw-on lenses for digital SLR cameras. The firm believes that it makes little money selling binoculars and that these new markets have great profit potential. Somewhat to Omega’s surprise, it finds it tough to make money with eyepieces. As of now, the firm appears to be selling the product at a low profit margin. Yet, Omega faces intense price pressure in this segment, and thinks that it might have to lower prices by 10% or more to stay competitive. The market for binoculars has been stable recently and Omega expects the trends to continue for the near future. Omega is most excited about entering the market for screw-on lenses for digital cameras. Although current volumes are small (relatively), Omega believes that there is substantial market potential for this product. Leveraging its excellent reputation for optics and lenses, Omega believes that it could reach and sustain two times the current volume of this product. This strategy also seems to make sense financially as this product looks like the most profitable of the three lines, per the firm’s accounting records. The following table provides key information about the product lines. (Note: All data have been disguised for confidentiality. However, relations among data items have been preserved.)
OMEGA OPTICAL INDIVIDUAL PROJECT FALL 2016 Eyepieces Binoculars Camera Lens Sales volume (units) 100,000 40,000 28,000 Selling Price $80.00 $160.00 $196.00 TRACEABLE COSTS Per Unit Direct Costs of Labor & Materials 39.60 55.00 63.50 Per Unit Variable Costs of Licensing & Patent fees 20.40 40.40 48.50 OVERHEAD ? ? ?

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