Jerry Burnside, controller of Pitts Industries, Inc., tells you about a meeting of sev- eral top managers of the firm. The topic discussed was the introduction of a new product that had been undergoing extensive research and development. Burnside had thought the product would be brought out in the coming year, but the managers decided to give it further study. The product is expected to have a market life of ten years. Sales are expected to be 30,000 units annually at $90 per unit. The following unit costs were presented by Jamie Barker, manager of the division that would produce and sell the product. Materials $10 Direct labor Overhead (manufacturing) Selling and administrative expenses 17 30 12 Total costs $69 Barker went on to point out that equipment costing $3,000,000 and having an ex- pected salvage value of $100,000 at the end of ten years would have to be purchased. Adding the $900,000 that had already been spent on research and development brought the total outlay related to the new product to $3,900,000. Depreoiotie

Jerry Burnside, controller of Pitts Industries, Inc., tells you about a meeting of sev- eral top managers of the firm. The topic discussed was the introduction of a new product that had been undergoing extensive research and development. Burnside had thought the product would be brought out in the coming year, but the managers decided to give it further study. The product is expected to have a market life of ten years. Sales are expected to be 30,000 units annually at $90 per unit. The following unit costs were presented by Jamie Barker, manager of the division that would produce and sell the product. Materials $10 Direct labor Overhead (manufacturing) Selling and administrative expenses 17 30 12 Total costs $69 Barker went on to point out that equipment costing $3,000,000 and having an ex- pected salvage value of $100,000 at the end of ten years would have to be purchased. Adding the $900,000 that had already been spent on research and development brought the total outlay related to the new product to $3,900,000. Depreoiotie

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 29P: Nico Parts, Inc., produces electronic products with short life cycles (of less than two years)....

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