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the chief engineer for Portland Purifiers, a maker of industrial water filters with major (and patentable)...

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Accounting

the chief engineer for Portland Purifiers, a maker of industrialwater filters with major (and patentable) improvement over currentmarket offerings. she estimates that the development of the productlaunch cost half a million dollars, including tooling themanufacturing line. the last product launch cost about $200,000 inmarketing and promotion costs. she thinks the product would sellfor about $50,000 and should sell 75 units in year 1, 140 in year2, and then level out at 200 per year. contribution margins is 40percent. should the company continue with this project? what do youneed to know about the company in order to understand its decisionto go or not go ahead? what is the payback period?

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4.2 Ratings (479 Votes)
Development costs of the product is estimated at half a million dollars ie 500000 and assuming that marketing and promotion costs for product is same as last launched product cost ie 200000 Therefore initial cost of product    See Answer
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Transcribed Image Text

the chief engineer for Portland Purifiers, a maker of industrialwater filters with major (and patentable) improvement over currentmarket offerings. she estimates that the development of the productlaunch cost half a million dollars, including tooling themanufacturing line. the last product launch cost about $200,000 inmarketing and promotion costs. she thinks the product would sellfor about $50,000 and should sell 75 units in year 1, 140 in year2, and then level out at 200 per year. contribution margins is 40percent. should the company continue with this project? what do youneed to know about the company in order to understand its decisionto go or not go ahead? what is the payback period?

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