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QUESTION 10 10 points Save Answer Babo Pencil Sharpener Company Babo Pencil Sharpener Company designs and manufactures electric pencil sharpeners which they sell through college bookstores. Their customers have asked for a new less expensive model, expected to sell for $12 at the bookstores. Babo's product manager believes the bookstores can sell 20,000 units over the expected 2 year life of the product. The bookstores require a 30% gross margin. Design engineers indicate the design cost for the new sharpener will be $15,000. Selling and administration costs are expected to be 15% of Babo's selling price; Babo management expects an 8% pre-tax profit on all new products. The product manager receives approval to proceed with the design and contacts suppliers for the three components needed for the sharpener and receives first pass cost estimates as follows: Quantity Cost per Qty Materials Blades 2.40 Electronics 1 $ 1.05 Casing 1 $ 1.65 The product manager works with manufacturing and determines each sharpener will take 3 minutes to assemble and test at a rate of $24.00 per hour for direct labor and manufacturing overhead. She also works with marketing to assess customer expectations of features for the new sharpener: Feature Survey Score Component Contribution Fast sharpening 50% Blades, 50% Electronics Easy to clean 70% Casing, 30% Blades Attractive appearance 100% Casing Assume the Value Index for the Casing is 1.3. The product manager should: O A. Reduce the cost of the Casing to bring the total cost closer to the target cost O B. Decrease the "easy to clean" contribution of the Casing from 70% to 50% O C. Consider spending more on the Casing to enhance customer satisfaction O D. Increase the score for attractive appearance to 8

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