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Hi, Please provide detail answers, thank you so much! Commtech, Inc., designs and sells cellular phones. The company creates the technical specifications and the software
Hi,
Please provide detail answers, thank you so much!
Commtech, Inc., designs and sells cellular phones. The company creates the technical specifications and the software for its products, though it outsources the production of the phones to an overseas contract manufacturer. Commtech has arrangements to sell its phones to the major wireless communications companies who, in turn, sell the phones to end customers packaged with calling plans. The product life cycle for a phone model is about six months, and Commtech recognizes revenue at the time of delivery to the wireless communications company. The product team for the CD924 model has met to consider a possible modification to the phone. The software team has developed an improved global positioning application for a new phone model, and this application works in the CD924. It could be uploaded to existing phones through the wireless networks. Marketing's analysis of focus groups and customer feedback is that further sales of the CD924 would be enhanced significantly if the new application were made available. The software engineers have demonstrated that the new GPS application can be successfully sent wirelessly to the CD924. However, the finance manager points out that Commtech's financial statements have been based on the assumption that the company's phones do not involve "multiple deliverables, " like upgrades. All revenue is recognized at the point of sale to the wireless communications companies. Like many communications hardware companies, Commtech has been under pressure to demonstrate its financial performance. Offering an upgrade to the CD924's navigation capabilities would probably be viewed as a significant deliverable in terms of customer value, and the finance manager says that "the accounting won't let us do it." How should the product team proceedStep by Step Solution
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