(Answered) Problem - dover company manufactures cell phones and plans

Accounting

PROBLEM - Dover Company manufactures cell phones and plans to develop a new model with a feature (aptly named Don't Drink and Dial) that prevents the phone from dialing an owner-defined list of phone numbers between the hours of midnight and 6:00 AM. The new phone model has a target price of $380. Management requires a 25% profit on new product revenues. The overall research and development costs are expected to total $3,000,000. Annual sales volume is expected to average 120,000 phones over an expected life cycle of 5 years. Annual fixed overhead plus fixed selling and administrative costs are expected to total $500,000.

A. Calculate the target variable cost per unit.

B. Based on your answer in part A and assuming that expected variable costs per unit are as follows:

Direct materials $175

Direct labor 20

Variable Overhead 75

Variable Selling 3% commission on sales

Would Dover Company agree to develop, manufacture, and sell this product? Support your response with calculations.

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