Reference no: EM13575014

Saitama Amusements Corporation places electronic games and other amusement devices in supermarkets and similar outlets throughout Japan. Saitama Amusements is investigating the purchase of a new electronic game called Mythical Marauders. The manufacturer will sell 20 games to Saitama Amusements for a total price of ¥167,000. (The Japanese currency is the yen, which is denoted by the symbol ¥.) Saitama Amusements has determined the following additional information about the game: a. The game would have a five-year useful life and a negligible salvage value. The company uses straight-line depreciation. b. The game would replace other games that are unpopular and generating little revenue. These other games would be sold for a total of ¥21,000. c. Saitama Amusements estimates that Mythical Marauders would generate annual incremental revenues of ¥207,000 (total for all 20 games). Annual incremental out-of-pocket costs would be (in total): maintenance, ¥44,000; and insurance, ¥8,200. In addition, Saitama Amusements would have to pay a commission of 43% of total revenues to the supermarkets and other outlets in which the games were placed. (Ignore income taxes.