Chapter 10 Minicase Essay

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Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. Over the years, the company expanded into manufacturing and is now a reputable manufacturer of various electronic items. One of the major revenue-producing items manufactured by Conch Republic is a Smartphone. Conch Republic currently has Smartphone model on the market and sales have been excellent. The smartphone is a unique item in that it comes in a variety of tropical colors ad is preprogrammed to play Jimmy Buffett music. However as with any electronic item, technology changes rapidly, and the current smartphone has limited features in comparison with newer models. Conch republic spent $750,000 to develop a prototype for a new smartphone that has all the features of the existing one, but adds new features such as WIFI capability. The company has spent a further $200,000 for a marketing study to determine the expected sales figures for the new smartphone. Conch republic can manufacture the new smartphone for $185 each in variable costs. Fixed costs for the operation are estimated to run $5.3 million per year. The estimated sales volume is 74,000, 95,000, 125,000, 105,000, and 80,000 per year for the next five years, respectively. The unit price of the new smartphone will be $480. The necessary equipment can be purchased for $38.5 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $5.4 million. As previously stated, Conch Republic currently manufactiures a smart phone. Production of the existing model is expected to be terminated in two years. If Conch Republic does not introduce the new smartphone, sales will be 80,000 units and 60,000 units for the next two years, respectively. The price of the existing smart phone is $310

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