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Elektronics

is going to introduce a combination phone/tablet product. Design and testing will take 8 months.

Elektronics

expects to sell

30,000

units during the first 6 months of sales. Sales over the next 12 months are expected to be less robust at

28,000.

And, sales in the final 6 months of the expected life cycle are expected to be

14,000.

Elektronics

is budgeting for this product as follows:

Elektronics is going to introduce a combination phone/tablet product. Design and testing will take 8 months. Elektronics expects to sell 30,000 units during the first 6 months of sales. Sales over the next 12 months are expected to be less robust at 28,000 . And, sales in the final 6 months of the expected life cycle are expected to be 14,000 . Elektronics is budgeting for this product as follows: (Click the icon to view the cost information.) Read the 1. If Elektronics prices the phone/tablets at $350 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price stays at $350 ? 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Elektronics is concerned about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $310 for the first 6 months and then increasing the price to $350 thereafter. With this pricing strategy, Elektronics expects to sell 33,000 units instead of the originally forecast 30,000 units in the first sales phase, and the same \begin{tabular}{|lllrr|} \hline Months 15-26 & Production & $ & 750,000 & $52 per unit \\ & Marketing & $ & 1,370,000 & \\ & Distribution & $ & 400,000 & $2 per unit \\ Months 27-32 & Production & $ & 355,000 & $50 per unit \\ & Marketing & $ & 440,000 & \\ & Distribution & $ & 160,000 & $4 per unit \\ Ignore the time value of money. & & & \\ \hline \end{tabular} operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price stays at $350 ? 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Elektronics is concerned about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $310 for the first 6 months and then increasing the price to $350 thereafter. With this pricing strategy, Elektronics expects to sell 33,000 units instead of the originally forecast 30,000 units in the first sales phase, and the same number of units for the remaining life cycle. Assuming the same cost structure as given in the problem, which pricing strategy would you recommend? Explain. \begin{tabular}{|lllrr|} \hline \multicolumn{1}{|c}{ Months } & Type of Cost & TotalFixedCostforthePeriod & VariablecostperUnit \\ \hline Months 0-8 & Design costs & $ & 700,000 & \\ Months 9-14 & Production & $ & 996,000 & \$62 per unit \\ & Marketing & $ & 820,000 & \\ & Distribution & $ & 424,000 & \$4 per unit \\ Months 15-26 & Production & $ & 750,000 & \$52 per unit \\ & Marketing & $ & 1,370,000 & \\ & Distribution & $ & 400,000 & \$2 per unit \\ Months 27-32 & Production & $ & 355,000 & \$50 per unit \\ & Marketing & $ & 440,000 & \\ \hline \end{tabular} Elektronics is going to introduce a combination phone/tablet product. Design and testing will take 8 months. Elektronics expects to sell 30,000 units during the first 6 months of sales. Sales over the next 12 months are expected to be less robust at 28,000 . And, sales in the final 6 months of the expected life cycle are expected to be 14,000 . Elektronics is budgeting for this product as follows: (Click the icon to view the cost information.) Read the 1. If Elektronics prices the phone/tablets at $350 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price stays at $350 ? 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Elektronics is concerned about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $310 for the first 6 months and then increasing the price to $350 thereafter. With this pricing strategy, Elektronics expects to sell 33,000 units instead of the originally forecast 30,000 units in the first sales phase, and the same \begin{tabular}{|lllrr|} \hline Months 15-26 & Production & $ & 750,000 & $52 per unit \\ & Marketing & $ & 1,370,000 & \\ & Distribution & $ & 400,000 & $2 per unit \\ Months 27-32 & Production & $ & 355,000 & $50 per unit \\ & Marketing & $ & 440,000 & \\ & Distribution & $ & 160,000 & $4 per unit \\ Ignore the time value of money. & & & \\ \hline \end{tabular} operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price stays at $350 ? 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Elektronics is concerned about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $310 for the first 6 months and then increasing the price to $350 thereafter. With this pricing strategy, Elektronics expects to sell 33,000 units instead of the originally forecast 30,000 units in the first sales phase, and the same number of units for the remaining life cycle. Assuming the same cost structure as given in the problem, which pricing strategy would you recommend? Explain. \begin{tabular}{|lllrr|} \hline \multicolumn{1}{|c}{ Months } & Type of Cost & TotalFixedCostforthePeriod & VariablecostperUnit \\ \hline Months 0-8 & Design costs & $ & 700,000 & \\ Months 9-14 & Production & $ & 996,000 & \$62 per unit \\ & Marketing & $ & 820,000 & \\ & Distribution & $ & 424,000 & \$4 per unit \\ Months 15-26 & Production & $ & 750,000 & \$52 per unit \\ & Marketing & $ & 1,370,000 & \\ & Distribution & $ & 400,000 & \$2 per unit \\ Months 27-32 & Production & $ & 355,000 & \$50 per unit \\ & Marketing & $ & 440,000 & \\ \hline \end{tabular}

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