Calco Corporation, a producer and distributor of plastic products for industrial use, is considering a proposal to produce a plastic storage designed especially for the consumer market. The product is well suited for Calco's manufacturing process, requiring no costly machinery modifications or Assembly Department changes. Adequate manufacturing capacity is available because of recent facility expansion and a leveling of sales growth in Calco's industrial product line.
Management is considering two alternatives for marketing the product. The first is to add this responsibility to Calco's current Marketing Department. The other alternative is to acquire a small, new company names Jasco Inc. at a nominal cost. This company was started by some former employees of a firm that specialized in marketing plastic products for the consumer market when they lost their jobs because of a merger. Jasco has not yet started operations.
The Product Engineering Department has prepared the following unit manufacturing cost estimate for the new storage unit at both the 100,000- and the 120,000-unit levels of production.

The Marketing Department has used its experience with industrial products to develop a proposal for distributing the new consumer product. The Marketing Department will be reorganized so that several positions scheduled for elimination will instead be assigned to the new product. The Marketing Department's forecast of annual financial results for its proposals to market the storage units is as follows:

The Jasco founders also prepared a forecast of the annual financial results, based on their experience in marketing consumer products. The following forecast was based on the assumption that Jasco would become part of Calco and be responsible for marketing the storage unit:

Required:
(1) List factors Calco should consider before it enters the consumer products market.
(2) Alter financial forecasts for use in deciding between the alternatives, if Calco decides to enter the consumer market.
(3) Compare the reliability of the two proposals.
(4) Identify the non quantitative factors Calco should consider when choosing between the alternatives. Indicate whether any one of these factors is sufficiently important to warrant selection of one alternative over the other, regardless of the estimated financial effect on profit.

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Direct materials Direct labor... $14.00 3.50 10.00 $27.50 Factory overhead (25% variable). $4,500,000 Sales (100,000 units at $45.. Costs: Cost of units sold (100,000 units at $27.50 each) Marketing costs: $2,750,000 Positions that were to be eliminated... Sales commission (5% of sales) Advertising programua Promotion program Share of current Marketing Department's management costs........ 600,000 225,000 400,000 200,000 100,000 $4.275,000 $ 225,000 Total cost.. Income before income tax Sales (120,000 units at $50$6,000,000 Costs Cost of units sold (120,000 units at $27.50)………… Marketing costs: $3,300,000 Personnel sales.. Personnel -sales management.. Commission (1096) Advertising program 660,000 200,000 600,000 800,000 200,000 Office rental (the annual rental of a long-term lease already signed by Jasco). 50,000 $5,810,000 Total cost Income before income tax