must analyze a potential new product-a caulking compound that cory Material's R&D people developed for use in the residential construction industry. Cory's marketing manager thinks the company can sell 115,000tubes per year at a price of $3.25 each for 3 years, after which the product will be obsolete. The required equipment would cost $150,000, plus another $25,000 for shipping and installation. Current assets (receivables and inventories) would increase by $35,000, while current liabilities (accounts payable and accruals) would rise by $15,000. Variable cost per unit is $1.95, fixed costs (excluding depreciation) would be $70,000 per year, and fixed assets would be depreciated under MACRS with a 3-year life. (Refer to Appendix 12A for MACRS dwpreciation rates).
You must analyze a potential new product-a caulking compound that cory Material's R&D people developed for use in the residential construction industry. Cory's marketing manager thinks the company can sell 115,000tubes per year at a price of $3.25 each for 3 years, after which the product will be obsolete. The required equipment would cost $150,000, plus another $25,000 for shipping and installation. Current assets (receivables and inventories) would increase by $35,000, while current liabilities (accounts payable and accruals) would rise by $15,000. Variable cost per unit is $1.95, fixed costs (excluding
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