In a recent meeting, the sales manager of AMT highlights that there is a huge demand for speed outboard motors like Pro and Jet versions more than our Four Stroke motors. Then Oliver asked if we better increased our product range and manufacture Pro and Jet versions of Outboard motors. You remarked that we can do but there are additional processes and costs incurred.

Manufacture Pro and Jet version of outboard motors, it required powerful motor engine. A Pro motor engine costs $50 more than Four Stroke motor engine and a Jet version motor engine costs 100% higher than Four Stroke motor engine. In addition, each of these versions is required a special electric unit & harness system. The pro version electric unit and harness system is $25 higher than Four Stroke one and the Jet version electric unit and harness system is $50 higher than Four Stroke one. In terms of labour, both the Pro and Jet version might take an additional 30 min of assembling time and an additional 1 hour of electrician time.

The sale manager says that the Jet version outboard motor could be sold for $1,500, but the Pro version has a variety of prices in the market model. so, we could come up with the price for the Pro version. However, you are not sure whether the price for the Jet version is sufficient. You said you need to do calculations before making any decision.

Required:

a). Make your decision whether it is worth processing the Four Stroke motor to the Jet version and selling it for $1500. Use calculation for supporting your argument. (Sell and further processing, Joint costing, chapter 6, 5 marks)

b). If the business decides to go for the Pro version, which is the minimum price AMT should set for the Pro version outboard motor for it being worth processing further from a Four Stroke outboard motor. (Sell and further processing, Joint costing, chapter 6, 5 marks)