costacctg13_sm_ch11

Accepting the miami co mpany and buckeye offer will

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: o be considered: a. Customer sat isfact ion. If 2.0 is significant ly better than 1.0 for its customers, a customer driven organizat ion would immediately introduce it unless other factors offset this bias towards “do what is best for the customer.” b. Qualit y level o f Easyspread 2.0. It is crit ical for new software products to be fully debugged. Easyspread 2.0 must be error­free. Consider an immediate release only if 2.0 passes all qualit y tests and can be fully supported by the salesforce. c. Importance of being perceived to be a market leader. Being first in the market with a new product can give Basil So ftware a “first­mover advantage,” e.g., capturing an init ial large share of the market that, in itself, causes future potential customers to lean towards purchasing Easyspread 2.0. Moreover, by introducing 2.0 earlier, Basil can get quick feedback fro m users about ways to further refine the so ftware while its compet itors are still working on their own first versio ns. Moreover, by locking in early customers, Basil may increase the likeliho od of these customers also buying future upgrades of Easyspread 2.0. d. Morale o f developers. These are key people at Basil So ftware. Delaying introduction of a new product can hurt their morale, especially if a co mpet itor then preempts Basil fro m being viewed as a market leader. 11­20 11­32 (20 min.) Opportunity costs. 1. The opportunit y cost to Wolverine of producing the 2,000 units of Orangebo is the contribution margin lost on the 2,000 units of Rosebo that would have to be forgone, as computed below: Selling price Variable costs per unit: Direct materials Direct manufacturing labor Variable manufacturing overhead Variable marketing costs Contribut ion margin per unit Contribut ion margin for 2,000 units $20 $ 2 3 2 4 11 $ 9 $ 18,000 The opportunit y cost is $18,000. Opportunit y cost is the maximum contribut ion to operating inco me that is forgone (rejected) by not using a limited resource in it s next­best alternat ive use. 2. Contribut ion margin fro m manufacturing 2,000 units of Orangebo and purchasing 2,000 units of Rosebo fro m Buckeye is $16,000, as follo ws: Manufacture Orangebo Selling price Variable costs per unit: Purchase costs Direct materials Direct manufacturing labor Variable manufacturing costs Variable marketing overhead Variable costs per unit Contribut ion margin per unit Contribut ion margin fro m selling 2,000 units of Orangebo and 2,000 units of Rosebo $15 –...
View Full Document

Ask a homework question - tutors are online