Jonathan is the owner of company that produces a mobile DJ system that allows pa

Question

Jonathan is the owner of company that produces a mobile DJ system that allows party guests or bar patrons to stream from playlists that cue from their mobile devices. Given the revolutionary nature of the system, it took many failed trials to create a system that actually worked, at a total cost of $230,000 to develop. At this point, Jonathan sells a unit for $6500, each of which costs $5000 in electronics components, materials, and labor to produce. He has a facility which cost him $1200 this month to rent. What costs should Jonathan take into consideration when deciding to fulfill a purchase order for additional unit? Explain.

Explanation / Answer

To fulfill the purchase order for additional unit, Jonathan should consider the cost of electronics components, materials and labor to produce. If Jonathan can fulfill the purchase order for additional unit this month, then he need not consider the rental cost.

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