GameFan Inc. manufactures game systems. GameFan has decided to create and market a new system with wireless controls and excellent video graphics. GameFan's managers are thinking of calling this system the Yew. Based on past experience, they expect the total life cycle of the Yew to be four years, with the design phase taking about a year. They budget the following costs for the Yew: Click the icon to view the budget.) Required Requirement 1. Suppose the managers at GameFan price the Yew game system at $120 per unit. How many units do they need to sell to break even? (Round your answer up to the nearest whole unit.) GameFan will need 487397 units to break even. Requirement 2. The managers at GameFan are thinking of two alternative pricing strategies. (a) Sell the Yew at $120 each from the outset. At this price, they expect to sell 1,520,000 units over its life cycle; (b) Boost the selling price of the Yew in year 2 when it first comes out to $210 per unit. At this price, they expect to sell 110,000 units in year 2. In years 3 and 4, drop the price to $120 per unit. The managers expect to sell 1,180,000 units in years 3 and 4. Which pricing strategy is recommended? Explain. In order to effectively answer this question, we must first determine the operating income under each option. First calculate the life cycle operating income (loss) for option (a). (Enter operating losses with parentheses or a minus sign.) Projected Life Cycle Statement of Comprehensive Income Revenues Variable costs Fixed costs Life cycle operating income (loss) Now calculate the life cycle operating income (loss) for option (b). (Enter operating losses with parentheses or a minus sign.) Projected Life Cycle Statement of Comprehensive Income Revenues Variable costs Fixed costs Life cycle operating income (loss) Which pricing strategy is recommended? Explain. Choose the correct answer below. A. Option B because it results in an overall higher operating income over the product's life cycle. B. Option A because it results in an overall higher operating income over the product's life cycle. C. Option A because it results in an overall higher variable costs over the product's life cycle. D. Option B because it results in an overall higher variable costs over the product's life cycle. Requirement 3. What other factors should GameFan consider in choosing its pricing strategy? Select all that apply. A. Changes in customer preferences B. Employee reaction C. Pricing in global markets D. Income tax considerations E. Competitor reaction Budget Required I Total fixed costs Variable cost over four years per unit Year 1 R&D costs 6,630,000 Design costs 1,510,000 Years 2-4 Production 19,600,000 Marketing and distribution Customer service 5,240,000 2,600,000 $56 per unit $9 per unit 1. Suppose the managers at GameFan price the Yew game system at $120 per unit. How many units do they need to sell to break even? 2. The managers at GameFan are thinking of two alternative pricing strategies. a. Sell the Yew at $120 each from the outset. At this price, they expect to sell 1,520,000 units over its life cycle. b. Boost the selling price of the Yew in year 2 when it first comes out to $210 per unit. At this price, they expect to sell 110,000 units in year 2. In years 3 and 4, drop the price to $120 per unit. The managers expect to sell 1,180,000 units in years 3 and 4. Which pricing strategy is recommended? Explain. 3. What other factors should GameFan consider in choosing its pricing strategy? Print Done Print Done