Furniture Manufacturing (FFM) has been manufacturing furniture for the home for over 30 years. George Fearless, the owner, has decided he would like to manufacture an executive desk that contains space for not only a laptop dock but also an MP3 player dock. Based on his experience with furniture, he believes the desk will be a popular item for four years, and then will be obsolete

because technology will have changed again.

FFM expects the design phase to be very short; maybe four months. There is no R&D cost because the idea came from George, without any real research. Also, fixed production costs will not be high because FFM has excess capacity in the factory. The FFM accountants have developed the following budget for the new executive desk:

Requirement 1. Using the assumptions given for this requirement, if FFM prices the desks at

$500

each, how much profit will FFM make in total and on average per desk? Begin by calculating the total profit FFM will make. (Enter operating losses with parentheses or a minus sign.)

Projected Life Cycle Statement of Comprehensive Income
Revenues
Variable costs:
Production
Distribution
Contribution margin
Fixed costs:
Design
Production
Marketing
Distribution
Life cycle operating income (loss)

Part 2

FFM will make an average profit of

$enter your response here

per desk. (Round your answer to the nearest cent.)

FFM will make an average profit of

$enter your response here

per desk. (Round your answer to the nearest cent.)

Part 3

Requirement 2. Assume that FFM sells

16,000

desks for

$400

each with the costs described for months

536,

and then incurs no additional costs and generates no additional revenue. Will this have been a profitable venture for FFM? First calculate the new life cycle operating income. (Enter operating losses with parentheses or a minus sign.)

Projected Life Cycle Statement of Comprehensive Income
Revenues
Variable costs:
Production
Distribution
Contribution margin
Fixed costs:
Design
Production
Marketing
Distribution
Life cycle operating income (loss)

Part 4

Given the new scenario, will this have been a profitable venture for FFM?

yes or no?

Requirement 3. Let's begin by determining the operating income if FFM still must incur the estimated fixed production costs for the whole period through month 52, even if FFM stops making executive desks at the end of 36 months. (Enter operating losses with parentheses or a minus sign.)

Life cycle operating income (loss) under Requirement 2
Additional fixed costs incurred
Revised life cycle operating income

Part 6

Based on above, will your answer to Requirement 2 change if FFM still must incur the estimated fixed production costs for the whole period through month 52, even if FFM stops making executive desks at the end of 36 months?

yes or no

if FFM continues to incur the fixed production costs for the full 48 months.