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Banner ID: @ 01704599 Sun Microsystems, is a manufacturer of mid-size computers, which are primarily used by medium and small businesses. Sun Microsystems's product line
Banner ID: @ 01704599
Sun Microsystems, is a manufacturer of mid-size computers, which are primarily used by medium and small businesses. Sun Microsystems's product line currently consists of three models of mid-size computers. The following data are available regarding the models: Model Selling Price per UnitVariable Cost per Unit Demand/Year (units) Model LX1 $1,600 $1,000 2,000 Model LX2 $2,400 $1,300 1,000 Model LX3 $2.900 $1,400 500 Sun Microsystems is considering the addition of a fourth model to its line of mid-size computers. This model, the SMX-4 would be sold for $3,500. The variable cost of this unit is the last 3 digits of your Banner ID The demand for the new Model SMX4 is estimated to be 600 units per year. Sixty percent of the new model's unit sales are expected to come from other models already being manufactured by Sun Microsystems 60% of the cannibalized amount from Model LX-1, 1096 from Model LX-2, 30% from Model LX-3. Sun Microsystems will incur a fixed cost of $200,000 to add the new model SMX-4 to its product line. The president of Sun Microsystems will only fund projects which show a positive cash flow by the end of the first year of the project. Answer the following questions: 1) What is your Banner ID? 2) What is unit contribution for SMX-4 3) Based on the above data should Sun Microsystems add the new Model SMX-4 to its line of mid-size computers? 4) Why (Support answer with increase/decrease in total contribution). MUST SHOW WORK FOR CREDITStep by Step Solution
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