Benco Devices, a division of Nicco Systems Products Inc. produces a small, specialized wifi signal boosting device that is effective in getting wifi signals to pass through concrete walls and other significant barriers. The division has existed for 7 years with varying degrees of success. Ned Marks, the manager of Benco is under a lot of pressure to improve Benco’s performance. This year, Benco has generated $14,400,000 of revenue on the sale of 12,000 systems. Unfortunately, the result is that this year they are currently operating at a loss of $2.408,000. This does not even factor in the original product design cost of $5,000,000 that was incurred 7 years ago. Costs related to the generation of annual revenue for the product are listed below. Product materials and labor cost (720,000) Indirect materials (24,000) Depreciation on production equipment (zero market value) (300,000) Other manufacturing costs (salaries and other similar costs that occur on a monthly basis) (744,000) Division-level facility sustaining costs (1,730,000) Allocated companywide facility-level costs (1,650,000) Sales commissions (3,600,000) Installation labor cost (2,400,000) Shipping and handling (300,000) Nonmanufacturing miscellaneous costs (60,000) Research and development (2,700,000) Legal fees to ensure product protection (780,000) Advertising costs (1,200,000) Rental cost of manufacturing facility (600,000) Josh Ruth, the controller of the division, elaborated on some of the costs indicating that the product materials and labor costs consist of the direct materials and labor that go into the making the device and total $60 per unit. The indirect materials consist of small material costs that are incurred as each unit is assembled and are nominal at $2 per device. Product installation requires working with each customer to get the device customized and working in good order. The costs of installation are a fixed at $200 per installation. The company has an agreement with a shipping company to deliver the device for $25. However, the shipping company has argued that the cost of shipments outside of the country should be $30. Benco has not and will not agree to this modification of the existing shipping contract. Sales people are paid on a strict commission basis of $300 of the selling price of each unit, irrespective of the origin or nature of the sale. Miscellaneous nonmanufacturing occur on a per sale basis and cost $5 per unit. Josh also indicated that the legal fees are based on a standing annual contract that applies to all legal services irrespective of the time commitment of the law firm. Ned was surprised that the rental cost of the manufacturing facility really ended up being $50 per unit this past year. He indicated being comfortable in his understanding of all of the other cost items. Ned is considering a number of possible opportunities to improve Benco’s profitability. The sales staff has identified a large franchise company with 200 outlets that is interested in a one-time purchase of Benco’s product. The company is outside of Benco’s regular market region and it is only willing to pay $800 for each installed device. Ned believes that Benco has the excess capacity to fill the order but is not certain if it makes sense. Ned seems to think it is a losing proposition. Josh thinks it could be profitable but is concerned that that word might travel that Benco gave some customer a preferred price. Josh believes this could cause Benco to have to give discounts to regular customers. He estimates that the discounts could amount to anywhere between $20,000 and $50,000. Benco also has the opportunity to purchase a comparable boosting device from a competing vendor for $500 per system. Ned is separately considering this opportunity. Benco would continue to sell and install the device if they switched to selling the other company’s product. In addition to this opportunity, Ned thinks that the resources that would be freed up by selling the other vendor’s product could be focused on Benco developing and selling some other product or service. Ned believes that accepting the vendor’s offer and selling a new product or service would have to increase Benco’s overall annual profits by at least $2,000,000 or it would not be worth the overall risk. He wants Josh to figure out if they should switch to selling the vendor’s device first and then determine the amount of profit the new product/service would have to generate to achieve his overall profit requirement for the two endeavors. Irrespective of the opportunities available to Benco, Ned knows that someone in the front office at Nicco is considering eliminating the entire Benco division. He is worried about what an analysis of his current divisional performance will indicate. He wants Josh to figure out if there is any risk that the division could be shut down based on this year’s performance. He also wants to know if his goal of increasing sales next year through its regular sales channels by 1000 units would change the look of the analysis. Required: Please treat each of the above issues/opportunities separately. For each issue/opportunity being considered by Benco, you should provide a clear analysis of each separate element of the issue or proposal being evaluated. Qualitative issues should also be discussed.