Balcom Enterprises Is Planning to Introduce a New Product That

question 8

Multiple Choice

Balcom Enterprises is planning to introduce a new product that will sell for $110 a unit.Manufacturing cost estimates for 20,000 units for the first year of production are: • Direct materials $1,000,000
• Direct labor $720,000 (based on $18 per hour × 40,000 hours)
Although overhead has not be estimated for the new product,monthly data for Balcom's total production for the last two years has been analyzed using simple linear regression.The analysis results are as follows:

$$\begin{array} { | l | l | } \hline \text { Dependent wariable } & \text { Factory overhead costs } \\\hline \text { Independent variable } & \text { Direct labor hours } \\\hline \text { Intercept } & \$ 120,000 \\\hline \text { Coefficient on independent } & \$ 5.00 \\\text { variable } & \\\hline \text { Coefticient of correlation } & 0.911\\\hline \text { R } ^ { 2 } & 0.814 \\\hline\end{array}$$
Based on this information,what is the expected contribution margin per unit to be earned during the first year on 20,000 units of the new product? (Assume that all marketing and administrative costs are fixed. )

• A) $14
• B) $13
• C) $99
• D) $32

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Definitions:

Distribution Operations

The processes involved in making a product or service available for use or consumption by a consumer or business user, including logistics, warehousing, and delivery.

One-Size-Fits-All

A product or solution designed to accommodate or be suitable for a broad range of tastes, preferences, or needs.

Customer Perceptions

The way customers view or interpret a company's products, services, and overall brand.

Customer Service

The support and guidance offered by a business to its customers who purchase or utilize its goods or services.