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QUESTION 3 VCI manufactures a line of DVD recorders that are distributed to large retailers The line consists of three models of recorders. The following data are available Model DVD selling price Variable cost per unit $175 250 300 Demand/year Model LX1 Model LX2 Model LX3 per unit $100 25 140 2,000 ,000 500 VCI is considering the addition of a fourth model to its line of DVDs. This model would be sold to retailers for $375. The variable cost of this unit is $225. The demand for the new model is estimated to be 300 units per year Sixty percent of the new model's sales is expected to come from other models already manufactured by VCT (10% from LX1, 30% from LX2, and 60% from LX3). VCI will incur a fixed cost of $20,000 to add the new model to the line Based on the preceding data, should VCI add the new model to its line? Why? QUESTION 4 After spending $300,000 for research and development, Citrus Industries have developed a new breakfast drink called Zap. Zap wil be packaged in ar B-ounce can and wili be introduced to the breakfast drink market, estimated to be 21 million B ounce cans nationally One major concern is the lack of funds for marketing. Accordingly, the management has decided to use newspaper(rather than TV) advertising to pramote Zap and distut Zap in major metropolitan areas, which account for 65% of the U.S. breakfast drink volume. Newspaper ads will carry a $0.20 coupon off per each can purchased. The retailer will receive the regular trade margin and be reimbursed for redeemed coupons by Citrus Industries. Past experience indicates that for every five cans sold, only one coupon will be redeemed. The cost of the newspaper advertising will be

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