Assume That Microsoft and Sony Both Plan to Introduce a New

question 22

Essay

Assume that Microsoft and Sony both plan to introduce a new hand-held video game.Microsoft plans to use a heavily automated production process to produce its product while Sony plans to use a labor-intensive production process.The following revenue and cost relationships are provided:
$\begin{array}{lccc}&\text { Microsoft Game}&\text { Sony Game }\\\text {Selling price per unit}&150&150\\\text { Variable cost per unit }\\\text { Direct material } & \$ 27.00 & \$27.00 \\ \text { Direct labor } & 7.50&30.00 \\ \text { Overhead } & 7.50&30.00 \\ \text { Selling and administrative } & 3.00 & 3.00\\\text { Annual fixed costs } & \\\text { Overhead } & \$ 600,000& \$ 240,000 \\\text { Selling and administrative } & 135,000& 135,000\end{array}$ Required:
(a)Compute the contribution margin per unit for each company.
(b)Prepare a contribution income statement for each company assuming each company sells 8,000 units.
(c)Compute each firm's net income if the number of units sold increases by 10%.
(d)Which firm will have more stable profits when sales change? Why?

Understand the process and effects of issuing common stock, including no par and stated value stocks, and the concept of paid-in capital.

Calculate and analyze dividend yields and understand their significance in assessing a company's financial health.

Grasp the fundamentals of corporate structure, including the advantages and disadvantages of incorporation.

Understand the accounting treatment and implications of treasury stock transactions and dividend distributions.

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Definitions:

Particular Negative

A logical statement that asserts the non-existence of some instances of a class or category.

Universal Affirmative

A logical statement that asserts something is true of all members of a particular category or class.

Categorical Propositions

Statements that assert or deny something about all members of a category, involving a subject and a predicate that relates to the subject.

Standard Form

A method of presenting arguments in a clear and logical structure, often aligning premises and conclusion to highlight logical flow.