Homework Solutions  
» Home
  

See All Homework
Questions here

Question Description

 
Posted by: Homeworkhelp
Price Quoted by Student: $5
Posted On: 2011-02-17 05:05:57
 
Question

Best View manufactures sophisticated digital cameras. The company’s new models are very popular, but it has an inventory of 1,000 old models for which there is little demand.

 

Decision to Sell or Rebuild Deficient Units

 

Best View manufactures sophisticated digital cameras. The company’s new models are very popular, but it has an inventory of 1,000 old models for which there is little demand. Best View is considering the following options for disposing of these old models:

 

1.      Sell them to a discount mail-order company at a total price of $150,000. The mail-order firm would then sell these old models at a unit price of $399.

 

2.      Convert them to new models at a remanufacturing cost of $700 per unit. These new models then could be sold to camera stores for $1200 each.

The old models had been manufactured at a cost of $450 per unit. The cost of manufacturing new models of the same size, however, normally amounts to $800 per unit.

 

INSTRUCTIONS

a. Perform an incremental analysis of the revenue, costs, and profit resulting from converting the old models to new models as compared with selling them to the mail-order firm.

b.)    Identify any sunk costs, out of pocket costs, and possible opportunity costs.

c.)    Indicate which of these options you would select and explain your reasoning, assuming that Best View currently:

1.      Has substantial excess capacity.

2.      Is operating at full capacity manufacturing new models.

 


Solutions
a. Perform an incremental analysis of the revenue,
Price $5
Attachment 1: Best View manufactures.doc
Solution Posted By: Homeworkhelp    Posted on: 17-02-2011