• Ford is evaluating the cost and benefits of a new hybrid vehicle model:
  • R&D Costs: $2.5 billion
  • Production Costs per Unit: $35,000
  • Selling Price per Unit: $55,000
  • Estimated Annual Sales: 120,000 units
  • Fixed Costs: $1.2 billion annually

• Requirements:
  1. Calculate the total cost of producing the new hybrid model annually.
  2. Prepare an income statement for the first year of production.
  3. Analyze the profit margin per unit and overall.
  4. Discuss the long-term strategic importance of the new hybrid model for Ford.
  5. Evaluate the financial risks associated with the new hybrid model.