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Moon Microsystems, is a manufacturer of mid-size computers, which are primarily used by medium and small businesses. Moon Microsystems's product line currently consists of three
Moon Microsystems, is a manufacturer of mid-size computers, which are primarily used by medium and small businesses. Moon Microsystems's product line currently consists of three models of mid-size computers. The following data are available regarding the modes: Model Selling Price Per Computer Variable Cost Per Computer Demand/Year (Units) MX-1 MX-2 MX-3 $1,550 $2,300 $2,800 $1,000 $1,250 $1,400 2,000 1,000 500 Moon Microsystems considering the addition of a fourth model to its line of mid- size computers. This model, the MX-4 would be sold for $3,500. The variable cost of this unit is $2,550. The demand for the new Model MX4 is estimated to be 450 units per year. Sixty percent of these unit sales of the new model is expected to come from other models already being manufactured by Moon Microsystems (Sixty percent from Model MX-1. Ten percent from Model MX-2. Thirty percent from Model MX-3.) Moon Microsystems will incur a fixed cost of $200,000 to add the new model MX-4 to its product line. The president of Moon Microsystems will only fund projects which show a positive cash flow by the end of the first year of the project. Based on the above data should Moon Microsystems add the new Model MX-4 to its line of mid-size computers? Why? [Show Work]
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