Video Concepts, Inc.(VCI) manufactures a line of DVD recorders (DVDs) that are distributed to large retailers. The line consists of three models of DVDs. The following data are available regarding the models: Model DVD Selling Price Variable Cost Demand/Year Per unit Per Unit (units) Model LX1 $175 $100 2000 Model LX2 $250 $125 1000 Model LX3 $300 $140 500 VCI is considering the addition of a fourth model to its line of DVDs. This model would be sold to retailers for $375. The variable cost of this unit is $225. The demand for the new Model LX4 is estimated to be 300 units per year, Sixty percent of these units sales of the new model is expected to come from other models already being manufactured by VCI (10 percent from Model LX1, 30 percent from Model LX2 and 60 percent from Model LX3. Vci will incur a fixed cost of 20,000 to add new model to the line. Based on the data do you think they should add a new Model LX4 to the lines or vcr’s and if so why?
