Gail Johnston Is the CFO of Lancet Technologies, a Manufacturer

question 72

Essay

Gail Johnston is the CFO of Lancet Technologies, a manufacturer of parts and supplies for the cable TV industry. Gail has developed an analysis of the profitability of the firm's two main product lines, cable hardware, and cable supplies. Based on the analysis, she concludes that cable hardware is the most profitable of the firm's product lines. Required:
1. Explain why Gail may be wrong in her assessment of the relative performances of the two product lines.
2. Suppose that 80 percent of the R&D and selling expenses are traceable to Hardware line. Prepare life-cycle income statements for each product and calculate the return on sales. What does this tell you about the importance of accurate life-cycle costing?

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Definitions:

Complementary Color Pairs

Colors that are opposite each other on the color wheel and when combined, cancel each other out to produce a grayscale color like white or black.

Chromatic Color

Colors that have hue, as opposed to achromatic colors (black, white, and grays), often perceived with a distinct colorfulness or saturation.

White

In a non-technical context, it refers to the color of maximum lightness; in a technical or racial context, it has different specific meanings.

Hue

A color or shade, especially as perceived in the spectrum of visible light.