Google is analyzing the financial impact of changing its pricing strategy for one of its cloud computing
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Question:
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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