The following data is available for a firm selling its computer hardware

by | Mar 18, 2020 | Uncategorized

  

The following data is available for a firm selling its computer hardware to two different
categories of customers. The price/cost structure varies according to the customer as follows:
New
Upgrade
Customers
Customers
Estimated mix
60% of total
40% of total
Selling price
$210
$120
Variable costs
Manufacturing
$25
$25
Marketing
65
90
15
40
Contribution margin
$120
$ 80
The relevant fixed costs for a period are $14,000,000.
(a)
Calculate the breakeven point in units.
(b)
If the estimated sales mix is achieved, what is the operating profit when 200,000 units
are sold?
(c)
Show how the breakeven point in units changes with the following customer mixes:
(i) new 50%, upgrade 50% (ii) new 90%; upgrade 10%; (iii) comment on these
results.

  

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