A sports good manufacturer in conjunction with a software house, is considering the launch of a new sporting simulator based on video tapes linked to a personal computer enabling much greater realism to be achieved. Two proposals are being considered. Both use the same production facilities and as these are limited, only one product can be launched. The following date are the best estimates the firm has been able to obtain: Foot ball simulator Cricket simulator Annual volume(units) 40,000 30,000 Selling price 130 per unit 200 per unit Variable production costs 80 per unit 100 per unit Fixed production costs 600,000 600,000 Fixed selling and Administrative costs 450,000 1,350,000 The higher selling and administrative costs for the cricket simulator reflect the additional advertising and promotion costs expected to be necessary to sell the more expensive cricket system. The firm has a minimum target of 200,000 profit per year for the new products. The management recognises the uncertainty in the above estimates and wishes to explore the sensitivity of the profit on each product to changes in the value of the variables (volume, price, variable cost per unit, fixed costs). Required a) To calculate the expected profit from each product. (4 Marks) b) To calculate the critical value for each variable (i.e the value at which the firm will earn 200,000), assuming that all other variables are expected (express this as an absolute value and as a percentage change from the expected value.); (3 Marks) c) To discuss the factors which should be considered in making a choice between the two products.