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Google is analyzing the financial impact of changing its pricing strategy for one of its cloud computing services. The company's current selling price per unit
Google is analyzing the financial impact of changing its pricing strategy for one of its cloud computing services. The company's current selling price per unit is $1,000, and it incurs variable costs of $600 per unit. Fixed costs amount to $200 million, and the company sells 500,000 units annually.
Requirements:
- Calculate Google's current contribution margin.
- Determine Google's contribution margin ratio.
- Compute Google's breakeven point in units and dollars.
- If Google reduces its selling price to $800 per unit, calculate the new breakeven point in units and dollars.
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