Gary Johnson, the general manager of Fortune, must decide when to release the new version of Fortune's fitness watch, TS-12. Development of TS-12 is complete but the product has not yet been produced. 1 More info x The major problem is that Fortune has overstocked the previous version of its fitness watch, TS-11. Johnson knows that once TS-12 is introduced, Fortune will not be able to sell any more units of TS - 11. Rather than just throwing away the inventory of TS-11, Johnson is wondering if it might be better to continue to sell TS-11 for the next 3 months and introduce TS-12 on October 1, 2020, when the inventory of TS - 11 will be sold out. - Data table $ TS-11 TS-12 190 $ 225 Selling price Variable cost per unit 24 28 Development cost per unit 45 80 37 47 Marketing and administrative cost per unit Total cost per unit 155 $ 84 $ 70 Operating income per unit Development cost per unit for each product equals the total costs of developing the watch divided by the anticipated unit sales over the life of the product . Marketing and administrative costs are fixed costs in 2020, incurred to support all marketing and administrative activities of Fortune and are allocated to products on the basis of the budgeted revenues of each product. The preceding unit costs assume TS - 12 will be introduced on October 1, 2020 106 Requirements 1. On the basis of financial considerations alone, should Johnson introduce TS-12 on July 1, 2020, or wait until October 1, 2020? Show your calculations, clearly identifying relevant and irrelevant revenues and costs. 2. What other factors might Gary Johnson consider in making a decision? Gary Johnson, the general manager of Fortune, must decide when to release the new version of Fortune's fitness watch, TS-12. Development of TS-12 is complete but the product has not yet been produced. 1 More info x The major problem is that Fortune has overstocked the previous version of its fitness watch, TS-11. Johnson knows that once TS-12 is introduced, Fortune will not be able to sell any more units of TS - 11. Rather than just throwing away the inventory of TS-11, Johnson is wondering if it might be better to continue to sell TS-11 for the next 3 months and introduce TS-12 on October 1, 2020, when the inventory of TS - 11 will be sold out. - Data table $ TS-11 TS-12 190 $ 225 Selling price Variable cost per unit 24 28 Development cost per unit 45 80 37 47 Marketing and administrative cost per unit Total cost per unit 155 $ 84 $ 70 Operating income per unit Development cost per unit for each product equals the total costs of developing the watch divided by the anticipated unit sales over the life of the product . Marketing and administrative costs are fixed costs in 2020, incurred to support all marketing and administrative activities of Fortune and are allocated to products on the basis of the budgeted revenues of each product. The preceding unit costs assume TS - 12 will be introduced on October 1, 2020 106 Requirements 1. On the basis of financial considerations alone, should Johnson introduce TS-12 on July 1, 2020, or wait until October 1, 2020? Show your calculations, clearly identifying relevant and irrelevant revenues and costs. 2. What other factors might Gary Johnson consider in making a decision
